الى ملوزية قح تفضلي هذا البحث الجزاء الاول

Home > Library > Miscellaneous > Britannica Concise Encyclopedia


Economic system in which most of the means of production are privately owned, and production is guided and income distributed largely through the operation of markets. Capitalism has been dominant in the Western world since the end of mercantilism. It was fostered by the Reformation, which sanctioned hard work and frugality, and by the rise of industry during the Industrial Revolution, especially the English textile industry (16th – 18th centuries). Unlike earlier systems, capitalism used the excess of production over consumption to enlarge productive capacity rather than investing it in economically unproductive enterprises such as palaces or cathedrals. The strong national states of the mercantilist era provided the social conditions, such as uniform monetary systems and legal codes, necessary for the rise of capitalism. The ideology of classical capitalism was expressed in Adam Smith's Wealth of Nations (1776), and Smith's free-market theories were widely adopted in the 19th century. In the 20th century the Great Depression effectively ended laissez-faire economics in most countries, but the demise of the state-run command economies of eastern Europe and the former Soviet Union (see communism) and the adoption of some free-market principles in China left capitalism unrivaled (if not untroubled) by the beginning of the 21st century.
For more information on capitalism, visit Britannica.com.

Investopedia Financial Dictionary:
Capitalism
Top
Home > Library > Business & Finance > Investment Dictionary
An economic system based on a free market, open competition, profit motive and private ownership of the means of production. Capitalism encourages private investment and business, compared to a government-controlled economy. Investors in these private companies (i.e. shareholders) also own the firms and are known as capitalists.

Investopedia Says:
In such a system, individuals and firms have the right to own and use wealth to earn income and to sell and purchase labor for wages with little or no government control. The function of regulating the economy is then achieved mainly through the operation of market forces where prices and profit dictate where and how resources are used and allocated. The U.S. is a capitalistic system.

Related Links:
Find out how the economic system we now use was created. History Of Capitalism
The Industrial Revolution introduced a new age of investing and financial self sufficiency. Financial Capitalism Opens Doors To Personal Fortune
Find out where your income and lifestyle place you in comparison to the national average. Losing The Middle Class
Learn economics principles such as the relationship of supply and demand, elasticity, utility, and more! Economics Basics
From unemployment and inflation to government policy, learn what macroeconomics measures and how it affects everyone. Macroeconomic Analysis
This tutorial teaches the basics of one of the most important economic topics. A must for all investors. Microeconomics
Does the amount of goods and services produced set the pace for economic growth? Here are the arguments. Understanding Supply-Side Economics
Why did the U.S. government take control of the steel industry in 1952?



Barron's Finance & Investment Dictionary:
Capitalism
Top
Home > Library > Business & Finance > Finance and Investment Dictionary
Economic system in which (1) private ownership of property exists; (2) aggregates of property or capital provide income for the individuals or firms that accumulated it and own it; (3) individuals and firms are relatively free to compete with others for their own economic gain; (4) the profit motive is basic to economic life.

Among the synonyms for capitalism are Laissez-Faire economy, private enterprise system, and free-price system. In this context economy is interchangeable with system.

Antonyms by Answers.com:
capitalism
Top
Home > Library > Literature & Language > Antonyms

n
Definition: economic system of private ownership
Antonyms: communism


Oxford Companion to the US Supreme Court:
Capitalism
Top
Home > Library > Law & Legal Issues > US Supreme Court
In a capitalist economic system most productive assets are held by private owners, and most decisions about production and distribution are made by the market rather than government command. Capitalism thus suggests a system of economic regulation that involves minimal state involvement. Nonetheless, even the most capitalistic economic systems contain some governmental supervision. The government must establish basic institutional rules, such as contract law. The government must also legislate to correct “market failure,” or situations where the unregulated market does not work well. Most importantly, in any democratic system a large number of interest groups continually petition the government for laws that bias market processes in their favor. Perhaps the Supreme Court's most important function as regulator of capitalism is to define the appropriate constitutional limit of governmental interference with individual, market‐driven decision making.

The word “capitalism” does not appear often in Supreme Court opinions. Further, nearly all the references before 1950 are pejorative, appearing in first amendment cases involving the right to make statements attacking capitalism as an institution. Examples include United States v. Debs (1919), where the defendant attacked capitalism as a cause of war, and Abrams v. United States (1919). In addition, Justice Louis D. Brandeis used the term occasionally in dissenting opinions to speak about the evils of uncontrolled capitalism (Liggett v. Lee, 1933; Maple Flooring Manufacturers Association v. United States, 1925).

The Supreme Court has always occupied a central position in the development of American capitalist institutions since the beginning of the nineteenth century. The Constitution's framers envisioned a regime in which most decisions about the allocation of goods and services should be private. The Contracts Clause, the Commerce Clause, the Due Process Clause, and the Takings Clause of the Fifth Amendment are strong examples of that commitment. Through its interpretation of the Constitution and a wide array of federal and state statutes and common law rules, the Supreme Court has defined the balance between individual prerogative and the independence of markets on the one hand, and sovereign power to interfere on the other.

Until the late 1930s the prevailing economic ideology on the Supreme Court was that of the classical political economists, who had a strong bias in favor of the “unregulated” market. This is not to say that there was little regulation. States and local government regulated a great deal. Indeed, the Supreme Court believed that there was too much regulation and that much of it was created in the interest of regulated firms rather than the consuming public.

The historical relationship between the Supreme Court and American capitalism has developed through several controversies concerning the proper scope of federal and state regulatory power.

Recognition of the Business Corporation and Facilitation of Its Development

Modern American capitalism would be unthinkable without the giant, multistate business corporation—a creature whose development was facilitated by a series of Supreme Court decisions.

The Supreme Court both adopted and expanded the common law's view that the business corporation is a “person” entitled to many of the same constitutional protections given to natural persons. Chief Justice John Marshall had clung to the traditional English view of Sutton's Hospital Case (1613) that a corporation was incapable of suing and being sued in its own name. Rather, the suit must name all the shareholders individually. Marshall's view was rejected by his own Court in Bank of United States v. Dandridge (1827). From that point on corporations could freely sue and be sued in federal court. Likewise, the Marshall Court held in Bank of the United States v. Deveaux (1809) that a corporation was not a “citizen” under the Constitution, but should be treated merely as a collection of its individual shareholders. Such decisions limited federal court access, because jurisdiction based on diversity of citizenship did not exist unless every shareholder in the dispute was from a different state than any party on the opposite side. Deveaux was overruled by the Taney Court in Louisville, Cincinnati & Charleston Railroad Co. v. Letson (1844), which held that a corporation should be deemed a “citizen” of the incorporating state. The result was substantially to increase federal protection of corporations.

The Supreme Court recognized the American business corporation as a “person” for federal constitutional purposes in Santa Clara Co. v. Southern Pacific Railroad (1886). Although liberals attacked the Santa Clara decision as biased in favor of big business, the decision's importance should not be exaggerated. Santa Clara was a sensible mechanism for permitting the corporation as an entity rather than its separate shareholders to assert the corporation's constitutional claims. Giving the corporation itself the constitutional claim was more efficient than giving it to the shareholders themselves. After Santa Clara individual shareholders could assert the constitutional rights of the corporation only if they brought a stockholders' derivative suit designed to force the corporation to defend its own rights. Such suits had been approved by the Court in Dodge v. Woolsey (1856).

One of the most important doctrines facilitating the multistate business corporation during the late nineteenth century was that the states lacked the power to exclude “foreign” corporations, or those chartered in a different state, from doing business within their borders. The traditional view had been to the contrary. In Bank of Augusta v. Earle (1839), the Taney Court held that corporations of one state could do business in another state, but only subject to that state's permission and regulation. As late as the 1880s the Supreme Court permitted states to exclude foreign corporations from doing business directly within their borders. However, in Welton v. Missouri (1876) it held that the Commerce Clause forbad states from excluding the products made by out‐of‐state corporations. Under Welton a corporation chartered, for example, in New Jersey could not build a plant in New York without New York's consent, but New York did not have the power to exclude the New Jersey corporation's goods, if the goods could legally be sold by New York's own corporations. The Court gradually narrowed state power to exclude foreign corporations from manufacturing within their borders as well, finally holding in Western Union Telegraph Co. v. Kansas (1910) that a corporation is a “person” within the jurisdiction of a state where it is doing business, and entitled not to be expelled except for violations of state law.

During the nineteenth century the Supreme Court frequently became involved in matters of corporate finance, the extent of limitations on corporate liability, and the scope of a corporation's power under its charter. The result was substantial federal doctrine regulating the inner workings of the corporation, its finances, and its dealings with outsiders. For example, in Sawyer v. Hoag (1873) the Court adopted the “trust fund” doctrine, which held that if a corporation's stated paid‐in capital was larger than the amount the shareholders had actually paid in, the shareholders themselves could be liable for the shortfall. The doctrine was designed to protect creditors from “watered” stock. Likewise, the Court often considered the question whether corporate activities were ultra vires, or unauthorized by the corporate charter—generally adopting a narrower view than that which prevailed in the states. For example, in Thomas v. West Jersey Railroad (1879), the court struck down as ultra vires an effective merger of two railroads when one leased all its track to the other.

The Supreme Court gradually relaxed the strict rule preventing corporations from doing business not authorized in their charters, particularly if the additional business was “necessary or convenient” to the corporation's authorized business. For example, in Jacksonville, Mayport, Pablo Railway & Navigation Co. v. Hooper (1896), the Court permitted a railroad to acquire a hotel in order to accommodate railroad passengers. The result was increased judicial approval of corporate vertical integration, a phenomenon that characterized much of the corporate growth at the turn of the century.

An unanticipated result of the use of business purpose statutes to challenge corporate mergers was that mergers of competitors were generally legal. For example, a corporation authorized to manufacture and distribute fuel oil, such as Standard Oil Company, could legally acquire a competing refinery, for that acquisition would not involve the corporation in unauthorized business. However, if Standard attempted to acquire a shoe factory, the acquisition would have been challenged as outside the scope of Standard's charter. As a result mergers of competitors—usually the most damaging to competition—were generally legal, while “conglomerate” mergers, whose competitive consequences are generally negligible, were forbidden. The result was that American merger policy gradually ceased to be the prerogative of corporate law and entered the domain of the antitrust laws.

In Briggs v. Spaulding (1891) the Court adopted a broad version of the “business judgment” rule, thereby giving corporate directors expansive power to make decisions without concern about liability suits from stockholders. This decision as well as others served to separate the ownership of the American business corporation from its management. The eventual result was a cry for more intensive regulation.

During the New Deal era the Supreme Court gradually accommodated much more intensive regulation of the American business corporation. For example, in Federal Trade Commission v. F. R. Keppel & Bros. (1934), the Court held that the FTC had the power to reach “unfair” business practices even if such practices were not anticompetitive under the antitrust laws.

More recently, the Supreme Court has exhibited a strong tendency to relax certain aspects of corporate regulation. Several decisions have developed the concept that the market for corporate securities is generally efficient; as a result, corporate managers have no special obligation to provide information to buyers and sellers of its securities (Chiarella v. United States, 1980; Basic, Inc. v. Levinson, 1988). Furthermore, the Court has held that at least some people should be able to profit from secret information about corporate illegality by buying and selling of the corporation's stock. Such transactions may encourage the discovery of such information (Dirks v. Securities and Exchange Commission, 1983). The fact that such trading may be “unfair” to people who do not have the information is not as important as the fact that permitting such trades makes the market work more efficiently. More recently, in Central Bank of Denver v. First Interstate Bank of Denver (1994), the Supreme Court greatly limited liability for “secondary” actors such as lawyers or accountants who might be indirectly involved in stock fraud.

Judicial Limits on the Jurisdictional Power to Regulate

Nineteenth‐century political economy was biased in favor of the free market and against regulation. This bias appeared in substantive legal rules as well as procedural and jurisdictional restrictions on state regulatory power. One important device that the Supreme Court has used to protect American capitalism from political interference is legal rules that confined state authority to the state's own territory, and federal authority to activities clearly in the flow of interstate commerce.

The Supreme Court held in Gibbons v. Ogden (1824) that the Constitution's Commerce Clause forbad a state from giving a steamboat company a monopoly of the route between ports in two different states. Gibbons limited the scope of such rights to intrastate activities. In Wabash, St. Louis and Pacific Railway Co. v. Illinois (1886) the Supreme Court held that a state could not impose rate regulation on railroad traffic if any part of the railroad's route lay outside the state. Pennoyer v. Neff (1877) reflected the Court's view that state courts had little power to obtain jurisdiction over people located outside the state.

Perhaps the most controversial limitation on state regulatory power in the nineteenth century was the rule in Swift v. Tyson (1842) that in federal court controversies between citizens of different states, the federal judge was not bound to follow state law but could refer to a “general” common law. Justice Joseph Story's purpose in Swift was unambiguous: interstate markets would work efficiently only if they were governed by a body of uniform rules that entrepreneurs could rely on. If one state engaged in parochial rule making—for example, to protect its debtors from out‐of‐state creditors—merchants would lose confidence in the interstate commercial market. Although Swift itself applied only to common law rules, later decisions such as Watson v. Tarpley (1855) applied the same rule to state statutes. The result encouraged development of a uniform system of commercial rules in federal court long before such transactions were comprehensively regulated by federal statute.

The Supreme Court also limited the states' power to apply their substantive law to activities that occurred outside the state. Allgeyer v. Louisiana (1897) substantially undermined state power to regulate out‐of‐state insurance companies. New York Life Insurance Co. v. Dodge (1918) reduced the power of a state to apply its unique contract law to contracts that had been executed in a different state. Importantly, however, the general common law was not considered “regulatory,” but rather as a body of universal rules that courts need only recognize. As a result, a state could apply the general common law to interstate transactions even if it could not do so by statute (Western Union Telegraph Co. v. Call Publishing Co., 1901). This was consistent with the Court's general position that the common law, if properly applied, did not interfere with markets but rather facilitated them.

The nineteenth‐century Supreme Court's hostility toward state regulation also showed up in severe limitations on state administrative agencies. For example, in Chicago, Milwaukee, and St. Paul Railway Co. v. Minnesota (1890), the Court struck down a state statute that gave a regulatory agency final authority to set railroad rates. Only in the 1920s did the Supreme Court become tolerant of railroad rate making by regulatory agencies rather than court or legislature (Wisconsin Railroad Commission v. Chicago, Burlington & Quincy Railroad Co., 1922).

The Supreme Court was also hostile toward regulatory incursions by the federal government and limited federal power to transactions that clearly involved interstate commerce, narrowly defined. For example, in United States v. E. C. Knight Co. (1895) the Court held that the federal antitrust laws could not be applied to a multistate manufacturing trust because manufacturing itself was not the same thing as interstate movement of goods. Likewise, Hammer v. Dagenhart (1918) struck down a federal child labor statute because the labor itself was performed within a single state. It was not sufficient that the goods produced by the labor were destined to be shipped in interstate commerce.

The New Deal effected a dramatic change in the Supreme Court's philosophy concerning the regulatory power of both the federal government and the states. Swift was overruled by Erie Railroad Co. v. Tompkins (1938). The International Shoe case (1945) greatly expanded state court jurisdiction over outsiders. The limitations on a state's power to apply its substantive law to transactions occurring elsewhere were relaxed in Watson v. Employers Liability Assurance Corp. (1954). On the other side, National Labor Relations Board v. Jones & Laughlin Steel Corp. (1937) greatly expanded federal power to regulate labor relations, provided the employer had any substantial interstate business. Hammer, the child labor decision, was expressly overruled by United States v. Darby Lumber Company (1941). Since the Court's decision in Wickard v. Filburn (1942), federal power to regulate has extended to highly localized activities where the “effect” on interstate commerce seems to be all but trivial.

Monopoly: State Power to Restrict Competition

“Monopoly” has two meanings in the history of American capitalism. Historically, a monopoly was an exclusive right given to a private entrepreneur by the sovereign. Later, “monopoly” came to refer to large firms that were dealt with under the antitrust laws.

Aside from the Gibbons case noted earlier, the Supreme Court's first important brush with state created monopoly was the Charles River Bridge case of 1837. Taking a strictly classicist approach, Chief Justice Roger B. Taney held that, although a state had the basic power to confer monopoly privileges on a business corporation, such rights would not be implied.

Even state power to create monopolies was challenged in the Slaughterhouse Cases (1873), where a bitterly divided Court approved a corporate charter that gave one corporation the exclusive right to operate a public slaughterhouse in New Orleans. The Court found that no clause of the recently enacted Thirteenth and Fourteenth Amendments took the power to create monopolies away from the states. The Slaughterhouse grant has been widely described as a product of the worst kind of special interest legislation. However, it was really a quite sensible mechanism for dealing with an important public health problem that arose when small slaughterhouses deposited animal waste into the Mississippi River, which constituted New Orleans' supply of drinking water.

“Liberty of Contract”: Price Regulation, Protective Labor Legislation, and Regulation of Product Quality

Classical political economy was committed to the belief that people should be able to enter and enforce any lawful contract. In the first half of the nineteenth century the Constitution's Contract Clause became one of the most important vehicles for protecting the market system. A second, quite different version of liberty of contract was not expressly written into the Constitution but was created by the Supreme Court around the beginning of the twentieth century in the doctrine of substantive due process.

Both branches of liberty of contract doctrine reflected hostility against legislation that interfered with private economic decision making. This hostility can be seen in the Court's attitude toward the political process—for example, its conclusion in Marshall v. Baltimore & Ohio Railroad Co. (1853) that legislatures were enslaved to special interests, whose lobbyists “subject the State government to the combined capital of wealthy corporations, and produce universal corruption. …” These “[s]peculators in legislation” would “infest the capital of the Union and of every State, till corruption shall become the normal condition of the body politic …” (pp. 334–335).

Liberty of Contract under the Contract Clause
The Contract Clause forbad the states from impairing the obligation of previously created contracts. During the Marshall period the Supreme Court developed two distinct branches of Contract Clause jurisprudence. A “private” branch generally prevented states from interfering with previous contracts between private parties and was principally a limitation on state power to pass debtor relief statutes. Sturges v. Crowinshield (1819) held that a state could not limit a creditor's recovery to a debtor's existing property, excluding attachment of future wages. Ogden v. Saunders (1827) upheld state insolvency statutes provided they were applied only to debts created after the statute was passed. Later Supreme Courts generally followed the Marshall‐era policy of according strict protection to previously created private agreements. For example, Bronson v. Kinzie (1843) prevented states from making it more difficult to foreclose mortgages that already existed when the statute was passed. And Gelpcke v. Dubuque (1864) forbad states from invalidating municipal bonds that had been sold to out‐of‐state creditors. Not until the New Deal, when constitutional classicism was in its death throes, did the Supreme Court deviate substantially from this course. For example, Home Building and Loan Association v. Blaisdell (1934) sustained a Depression‐era statute placing a moratorium on mortgage foreclosures.

The “public” branch of Contract Clause jurisprudence historically limited a state's power to renege on its own contractual obligations. Fletcher v. Peck (1810) held that a state could not revoke its previously given land grant, and the Dartmouth College case (1819) extended that rule to corporate charters. The public branch of Contract Clause jurisprudence revealed a great tension in Supreme Court liberty of contract analysis. On the one hand, corporate charters were contracts, and belief in the sanctity of contract was nothing less than an article of faith. On the other, early nineteenth century states had given corporations a wide array of monopoly privileges, tax exemptions, and other special prerogatives. These were generally abhorrent to classical political economy's view that the market alone should govern the fortunes of its entrepreneurial participants. The question now was whether to permit the states to renege on some of these promises—thus restoring the fairness and balance of the market—but in the process undermine the sanctity of the contract as corporate charter. The general answer was that even liberty of contract should be subordinated to the greater good of preserving the market.

In other areas the Supreme Court gave the states broad power over their corporations—holding, for example, in the Railroad Commission Cases (1886) that a corporate charter that permitted a railroad to charge “reasonable” rates nevertheless permitted a state agency to determine what rates were reasonable. After about 1850, the Contract Clause was no longer a substantial impediment to state power to limit corporate prerogative.
Substantive Due Process and Liberty of Contract
The Fourteenth Amendment doctrine of substantive due process was a product of a uniquely American version of classical political economy. In England, where land was scarce, labor restive, and social and economic mobility quite restricted, classicism's strict preference for the market had given way by 1850 to much more interventionist views of the role of the state. Economists such as John Stuart Mill and later Alfred Marshall supported some state‐imposed redistribution of wealth.

But America after the Louisiana Purchase (1803) held an abundance of undeveloped land and experienced both rapid economic growth and apparent high mobility for those who were ambitious. Within the classical vision, every laborer could quite easily become a landowner or entrepreneur—never mind that this did not include slaves or, in most states, women. Adam Smith's historical reverence for the unrestrained market persisted in the United States long after it was tempered in England. The Supreme Court justices may not have read the classical political economists directly, but they were quite familiar with Thomas M. Cooley's thoroughly classical Treatise on the Constitutional Limitations Which Rest Upon the Legislative Power of the States of the American Union (1868), which provided the intellectual foundation for substantive due process as a constitutional doctrine.

Substantive due process, unlike Contract Clause doctrine, regulated not merely the sanctity of preexisting contracts, but also the right of people to enter into various kinds of contracts. The era was hardly a period of “dry formalism,” as Roscoe Pound and other Progressive critics suggested, but rather of great judicial creativity. For example, in In re Debs (1895) the Court cut from new cloth the doctrine that the executive branch has the power to protect interstate commerce from labor disputes, even though Congress had not passed a statute authorizing the executive's action. And in Ex parte Young (1908) Justice Rufus W. Peckham held that the sovereign immunity provision of the eleventh amendment did not apply when a private party seeks to enjoin a state official from enforcing an unconstitutional statute, because the official is “stripped of his official or representative character” (p. 160). In this case, the statute was a railroad rate regulation alleged to violate due process of law.

The most controversial of the Supreme Court's substantive due process decisions was Lochner v. New York (1905), which struck down a statute that forbad bakers from working more than ten hours per day or sixty hours per week. The Court also struck down statutes that regulated product quality. For example, in Jay Burns Baking Co. v. Bryan (1924), it upset a statute requiring standardized weights for bread; and in Weaver v. Palmer Bros. (1926), a statute regulating the quality of bedding materials.

One of the most frequent targets of substantive due process analysis was rate regulation. In Munn v. Illinois (1877), which had preceded the substantive due process era, the Supreme Court permitted a state to regulate an unincorporated firm's prices, provided that it operated in a market “affected with a public interest.” These markets included enterprises that traditionally had been accorded monopoly protection or eminent domain power, such as shipping lines, common carriers and—in the case of Munn—grain elevators.

But later the Court made clear that the states lacked a general power to regulate rates; further, the prerogative of deciding what kinds of industries were affected with the public interest belonged to the courts, as in Tyson & Brother–United Theatre Ticket Offices v. Banton (1927). Perhaps the most famous decision involving price regulation is Adkins v. Children's Hospital (1923), which overturned a Washington, D.C., minimum wage law that applied only to women. The Supreme Court, using language borrowed from the classical political economists, concluded that “the right of the owner to fix a price at which his property shall be sold or used is an inherent attribute of the property itself,” and that there is a “moral requirement” of “just equivalence” between the price to be charged for labor and the value the employer places upon it (p. 558).

One of the markets consistently found to be affected with the public interest was the railroads, and the Supreme Court generally upheld state and later federal regulation of railroad rates. However, in Smyth v. Ames (1898), it held that such regulation must provide the railroad with a reasonable return on its investment. The rule that rate regulation is generally permissible, but regulation that deprives a private entrepreneur of a reasonable competitive profit is an unconstitutional taking of property, generally survives to this day.

Progressive Era critics characterized the Supreme Court majority during the early twentieth century (particularly Justices Rufus W.Peckham, James C. McReynolds, Willis Van Devanter, George Sutherland, Pierce Butler, and William Howard Taft) as a probusiness, antilabor group of mediocre intellectuals. But that view both underestimates the justices' intellect and overestimates their favoritism toward business. They were classicists, committed to the unregulated market. As such, they were just as quick to condemn probusiness regulatory legislation as wage‐and‐hour legislation. Progressive critics began with the premise that virtually all regulation was in the public interest and then focused their critique of the Court almost exclusively on protective labor legislation. In fact, however, the Court struck down equal numbers of statutes that were the product of regulatory “capture” by special interest groups within the business class. For example, in Louis K. Liggett Co. v. Baldridge (1928) it condemned a statute that required the licensing of pharmacists, designed mainly to protect druggists from cost‐cutting new competitors. In New State Ice Co. v. Liebmann (1932) it upset a statute that conditioned entry into the ordinary business of manufacturing ice on the applicant's demonstration of “necessity” and inadequacy of existing facilities—another device for protecting existing firms from competition.

Even during the heyday of substantive due process, the Supreme Court did not condemn all regulatory legislation. It upheld legislation it believed corrected an undesirable effect of the unregulated market. Muller v. Oregon (1908) sustained a ten‐hour law similar to that struck down in Lochner (1905), but which applied only to women. Brandeis's famous Brandeis brief cited social science data that women occupy a special position as the bearers of society's future children; and that women were generally unable to represent their own interests responsibly in the contracting process. The Supreme Court accepted these sexist, paternalistic arguments. Likewise, in Village of Euclid v. Ambler Realty Co. (1926) the Supreme Court upheld comprehensive land use planning and zoning—largely on the argument that high density and unplanned development could impose large costs on other members of the community, through increased traffic, noise, congestion, and demand for public services.

In a single year, 1937, substantive due process ended even more quickly than it began, largely as a result of the famous court‐packing plan of the Roosevelt administration, and Justice Owen J. Roberts's change of mind on the subject of minimum wage legislation in West Coast Hotel Co. v. Parrish (1937), which overruled Adkins.

More recently, however, the Supreme Court has been accused of revitalizing the spirit of Lochner by manufacturing other doctrines to limit regulatory power. For example, in Seminole Tribe of Florida v. Florida (1996), which expanded state sovereign immunity from federal lawsuits, Justice David Souter accused the majority of applying a Lochner‐like hostility toward regulation. He repeated that accusation in Alden v. Maine (1999), which held that Congress could not force state courts to entertain lawsuits under federal legislation regulating working conditions and wages. Justice Stephen G. Breyer made a similar accusation in College Savings Bank v. Florida Prepaid Postsecondary Education Expense Board (1999), in which the Supreme Court held that state agencies could not be sued under federal law for false advertising. Unquestionably, the Rehnquist Supreme Court has sought to cut back on federal regulatory power under a variety of constitutional doctrines.

The Supreme Court as Regulator of Business Competition

One of the Supreme Court's most important roles as manager of American capitalism flows from its position at the top of the hierarchy of institutions that regulate the competitive process. Competition is regulated by courts and administrative agencies of both state and federal government. The Supreme Court oversees all of these to one degree or another.

Before 1890, when the Sherman Antitrust Act was passed, business competition was regulated mainly through the common law of trade restraints. The Supreme Court applied this law in diversity of citizenship cases. Oregon Steamship Navigation Co. v. Winsor (1873) upheld a ten‐year covenant not to compete given as part of the sale of a steamship route. The covenant was reasonable because it (1) was ancillary to the sale of a business; (2) was restricted to a reasonable length of time; and (3) covered only the geographic area served by the route itself. But in Central Transportation Co. v. Pullman's Palace Car Co. (1890) the Court condemned a noncompetition covenant contained in a ninety‐nine‐year lease of railroad sleeping cars because the period of protection was unreasonably long. The court also adopted common‐law rules that were completely tolerant of business mergers, and even of price fixing, provided the price fixers did not use coercion or intimidation against others who attempted to undercut their prices. But in Gibbs v. Consolidated Gas Co. of Baltimore (1889) it held that price fixing of an article of “public necessity,” in this case illuminating gas, should be illegal even though price fixing in ordinary items might be protected by liberty of contract.

The Supreme Court's position on price‐fixing changed remarkably with the passage of the Sherman Antitrust Act in 1890. In its first substantive antitrust decision, United States v. Trans‐Missouri Freight Association (1897), it condemned a price‐fixing and traffic pooling arrangement among a group of railroads. The Supreme Court was unpersuaded by the economic argument, adopted by the lower court, that railroads were a network industry in which packages could reliably be transferred from one line to another only if there was a common scheme for scheduling and setting rates. It also rejected the argument that competition was particularly ruinous in the railroad industry. Since Trans‐Missouri, price fixing by competitors has been almost uniformly illegal in the United States, unless an industry is exempted by federal or sometimes state legislation. In Loewe v. Lawlor (1908) the Court applied its new‐found hostility toward price fixing to labor boycotts designed to secure a certain wage. The result was the rise of the federal labor injunction—a powerful union‐busting device until New Deal labor legislation largely exempted labor unions from antitrust law. The new legislation, which greatly increased labor union bargaining power, was upheld by the Supreme Court in National Labor Relations Board v. Jones & Laughlin Steel Co. (1937).

The Supreme Court also used the antitrust laws to develop an American merger policy dictated by principles of competition rather than corporate structure. In United States v. Addyston Pipe & Steel Co. (1899) it approved then‐Judge William Howard Taft's lower court ruling that price “fixing” that is merely ancillary to the combination of businesses into a single enterprise should not be treated as harshly as naked price fixing by firms that continue to hold themselves out as competitors. However, in Northern Securities Co. v. United States (1904), the Court condemned a merger that eliminated all competition between two transcontinental railroads, and in United States v. Union Pacific Railway Co. (1912) it held that the federal antitrust law could condemn a merger even though the merger was entirely legal under state corporation law. From that point on protecting consumers from collusion and high prices became a dominant concern of federal merger policy.

In 1950, however, Congress amended the antitrust laws to reflect a much greater concern with the fortunes of small businesses forced to compete with large firms. The result was a twenty‐year interlude from the 1960s into the early 1980s when the Supreme Court encouraged lower courts to void mergers that made the postmerger firm more efficient, on the theory that such mergers would injure competitors of the merging firms (as in Brown Shoe Co. v. United States, 1962). Only in the 1970s and 1980s did the Court begin to return to a more explicitly consumer‐oriented merger policy.

Between naked price fixing at one end and simple mergers at the other lay an array of business combinations and practices that may contain some attributes of both. Beginning in 1911 with Standard Oil v. United States and United States v. American Tobacco decisions, the Court began to fashion a “rule of reason” for evaluating the great majority of these practices. As described by Justice Brandeis in Board of Trade of the City of Chicago v. United States (1918), the rule of reason required a court to examine the history and development of a particular practice, its likely effects on competition, and any efficiency rationales that the practice might have. The Court later used this approach to approve such things as an agreement of competitors to exchange information about prices (Maple Flooring Manufacturers Assn. v. United States, 1925). However, it condemned concerted boycotts directed against competitors under the per se rule (Eastern States Retail Lumber Dealers' Association v. United States, 1914).

The Supreme Court also became heavily involved in business decisions about how products should be distributed. Dr. Miles Medical Co. v. John D. Park & Sons Co. (1911) condemned resale price maintenance, or agreements under which suppliers specify the price at which their products are to be resold. The much‐criticized rule that resale price maintenance is illegal per se survives until this day. The Supreme Court's position on nonprice restraints, such as clauses in which manufacturers specify store locations, has been far less consistent. Eventually Continental T.V. v. GTE Sylvania (1977) established that vertical nonprice restrictions should be governed by the rule of reason. Since then, most such restrictions are legal.

The Rehnquist Court has played a less prominent role in the making of antitrust policy than earlier Supreme Courts. One explanation is that the 1960s and 1970s were turbulent times for antitrust, as older doctrines favoring small business gave way to a more relaxed set of rules that favored low cost, efficient producers. Most of these rules were settled by 1986, when William H. Rehnquist was elevated to chief justice. In addition, during Chief Justice Rehnquist's term of office the size of the Supreme Court docket has been severely reduced, to roughly half as many cases per year as other recent Courts have heard. The decline in the number of antitrust cases has been even more severe.

The Rehnquist Court's leadership in antitrust has not been particularly strong, and some of the decisions are very hard to defend on economic grounds. For example, in Eastman Kodak Co. v. Image Technical Services (1992), the Court upheld a very dubious claim that a manufacturer of photocopiers with only 23 percent of the market could be a monopolist of its unique repair parts because someone who already purchased the photocopier was “locked in” to purchasing these parts from the defendant. The result has been a wave of monopolization claims against firms that are not monopolists of anything. In sharp contrast, in California Dental Association v. Federal Trade Commission (1999) the Court upheld restrictions on advertising that effectively permitted California dentists to cartelize their market. The pair of decisions creates an indefensible juxtaposition: a very benign attitude toward cartels, which are the most suspicious form of antitrust misconduct; and an overly aggressive attitude toward nonmonopolistic firms acting unilaterally, where anticompetitive results are highly unlikely.

Takings

One constitutional doctrine developed by the Supreme Court to limit state regulatory power is the Fifth Amendment clause providing that private property may not be “taken” without payment of just compensation. The Court first applied the clause to the states in Chicago, Burlington and Quincy Railroad Co. v. Chicago (1897). In Pennsylvania Coal v. Mahon (1922) the Court, speaking through Justice Oliver Wendell Holmes, struck down a state statute that required underground coal miners to support surface property even if the mining company owned a preexisting legal right to cause surface subsidence. Since the 1970s the Supreme Court has looked more closely at state and local regulatory legislation that reduces the value of private property or forces the property owner to accept the intrusion of unwanted objects or persons. During the Rehnquist era it has limited state and local government power to regulate land use by being much quicker to find liability for rules that are thought to have too harsh an impact on land owners. For example, Nollan v. California Coastal Commission (1987) held that a state could not condition the right to develop coastal land on the landowner's grant of an easement to the public. And in Lucas v. South Carolina Coastal Council (1992) the Court held that compensation could be required if a regulation severely reduced the value of property and the land owner could not reasonably have anticipated that the state would have regulated in the manner that it did.

Conclusion

The governance of American capitalism was undoubtedly the primary activity of the Supreme Court in the nineteenth century. During that period the Court was heavily influenced by classical political economy, and this interest shows up in the Court's strong bias in favor of the unregulated market. In the twentieth and early twenty‐first centuries the mixture of decisions has changed somewhat, but overseeing the regulation of economic markets continued to be among the Supreme Court's most important obligations. As regulator of capitalism the Supreme Court has frequently been doctrinaire and has often overruled itself when underlying ideology changed. Unquestionably, however, the Court has been a stabilizing influence on an economy which would have been far less robust had it been subject to every vagary of changing political power.

Bibliography

•Lawrence M. Friedman, A History of American Law, 2d ed. (1985).
•Lawrence M. Friedman, American Law in the Twentieth Century (2002).
•Morton J. Horwitz, The Transformation of American Law: 1780–1860 (1978).
•Morton J. Horwitz, The Transformation of American Law, 1870–1960: the Crisis of Legal Orthodoxy (1992).
•Herbert Hovenkamp, Enterprise and American Law, 1836–1937 (1991).
•J. Willard Hurst, The Legitimacy of the Business Corporation in the Law of the United States, 1780–1970 (1970).
•William J. Novak, The People's Welfare: Law and Regulation in Nineteenth Century America (1996)
— Herbert Hovenkamp

Oxford Dictionary of Geography:
capitalism
Top
Home > Library > Science > Geographical Dictionary
In Marxist terms, an arrangement whereby one class—the capitalists, or bourgeoisie—owns the factors of production while the workers possess only their labour, which they sell. According to Marxism, capitalism is a system of social domination which exploits the workers by undervaluing this labour. Accumulation is a key characteristic of capitalism, and a feature of advanced capitalism is the possession of capital by fewer and fewer owners.

A more general usage defines capitalism as a system where the factors of production are privately owned. Sales occur for profit in markets which are free in the sense that, subject to the constraints of the law, entrepreneurs are able to engage in business. The implicit assumption is that individuals are rewarded in relation to their economic contribution. However, some claim that the basic relationships of the capitalist economy are the cause of limits to growth.

Uneven development is one expression of the spatiality of capital; technology is adopted in a spatially uneven way and local labour markets—from trade unions to lawyers—bring about major variations in outcomes. Capitalism exploits the differences between spaces; it can appropriate, dominate, produce, and reproduce space, and render it more, or less, accessible.

Oxford Dictionary of Politics:
capitalism
Top
Home > Library > History, Politics & Society > Political Dictionary

A term denoting a distinct form of social organization, based on generalized commodity production, in which there is private ownership and/or control of the means of production. The word ‘capitalism’ is a relative latecomer in social science, with the OED citing its first use in 1854 (‘capitalist’ in 1792). Originally popularized by Marxist writers (Marx preferred to speak of the capitalist mode of production or bourgeois society), it is a term which has increasingly gained credence across the political spectrum, although this has inevitably produced inconsistency in its employment. At least three present-day usages are discernible.

1. The meaning derived from the work of Werner Sombart and Max Weber. Sombart describes capitalism in terms of a synthesis of the spirit of enterprise with the ‘bourgeois spirit’ of calculation and rationality. This geist or spirit is deemed to be an aspect of human nature and is seen to have finally taken a suitable form for itself in the shape of the economic organization of modern society. On this basis, Weber (in The Protestant Ethic and the Spirit of Capitalism) charts how the ‘spirit of capitalism’ transformed other modes of economic activity designated as ‘traditionalist’. A traditionalistic worker does not consider maximization of the daily wage as a primary objective, but opts instead to work to secure an accustomed style of life. The capitalist enterprise, by contrast, is based on a rational reorganization of production and is directed solely towards maximizing productive efficiency. Although Weber stops short of suggesting that the Protestant ethic produced capitalism, he believes that the origins of the capitalist spirit can be traced particularly to the ethics associated with Calvinism. Capitalism is therefore less the result of the introduction of new technology than the consequence of a new spirit of entrepreneurial enterprise. Weber (in General Economic History) develops an account of the rise of modern capitalism in post-feudal Europe, emphasizing characteristics broadly similar to those discussed by Marx. The spirit of rational calculation fosters a capitalist economic system in which wage-labourers are legally ‘free’ to sell their labour power; restrictions on economic exchange in the market-place are removed; technology is constructed and organized on the basis of rational principles; and there is a clear separation of home and workplace. Furthermore, capitalism enables the consolidation of the legal form of business corporation, the expansion of public credit, organized exchanges for trading in all commodities, and the organization of enterprises for the production of commodities rather than simply for trade. Above all, capitalism is characterized by the increased rationalization of social life, and the further advance of bureaucracy is seen as inevitable in the modern world. Capitalism, for Weber, is clearly the most advanced economic system ever created. However, its technical rationality threatens to constrict and extinguish the most distinctive values of Western civilization. Humanity is therefore trapped in an ‘iron cage’ of its own making.
2. The sense which identifies capitalism with the organization of production for markets. This is a usage derived from the German Historical School, with its primary distinction between the ‘natural economy’ of the medieval world and the ‘monetary economy’ of the modern age. This definition of capitalism as a commercial system is commonly buttressed by an emphasis on a certain type of motive, the profit motive. Although this definition has affinities with the Sombart/Weber view, its emphasis on the market economy lends it a substantially different focus.
3. Karl Marx sought the essence of capitalism neither in rational calculation nor in production for markets with the desire for gain (a system termed by Marx, ‘simple commodity production’). For Marx capitalism is a historically specific mode of production, in which capital (in its many forms) is the principal means of production. A mode of production is not defined by technology but refers to the way in which the conditions of production are owned and controlled and to the social relations between individuals which result from their connection with the process of production. Each mode of production is distinguished by how the dominant class, controlling the conditions of production, ensures the extraction of the surplus from the dominated class. As Marx clarifies in a famous passage, the really distinctive feature of each society is not how the bulk of labour is done, but how the extraction of the surplus from the immediate producer is secured: ‘It is in each case the direct relationship of the owners of the conditions of production to the immediate producers … in which we find the innermost secret, the hidden basis of the entire social edifice, and hence also the political form of the relationship of sovereignty and dependence, in short the specific form of state in each case’ (Capital, vol. iii, ch. 47). Capitalism is thus perceived as a transient form of class society in which the production of capital predominates, and dominates all other forms of production (generalized commodity production). Capital is not a thing, not simply money or machinery, but money or machinery inserted within a specific set of social relations whose aim is the expansion of value (the accumulation of capital). Capitalism is therefore built on a social relation of struggle between the bourgeoisie and the working class. Its historical prerequisite was the concentration of ownership in the hands of the ruling class and the consequential and ‘bloody’ emergence of a propertyless class for whom the sale of labour-power is their only source of livelihood. The distinction between the sale of labour and the sale of labour-power (the capacity to labour) is crucial, Marx argues, for understanding how all profit derives from the unpaid and therefore exploited labour of the worker. Capitalism therefore combines formal and legal equality in exchange with subordination and exploitation in production. The existence of trade, rational calculation, production for the market, the use of money, and the presence of financiers is not enough to constitute a capitalist society. For Marx, capitalism is based on a specific form of private property which enables capital to yoke labour to create surplus value in production. Like Weber, Marx portrayed capitalist society as the most developed historical organization of production. Unlike Weber, Marx envisaged that class struggle would intensify and produce an ever-expanding union of workers who, as a self-conscious, independent movement of the majority, would rise up and abolish capitalism.

All periodizations of capitalism are problematical. Whilst Marx claims that in Western Europe bourgeois society began to evolve in the sixteenth century and was making giant strides towards maturity in the eighteenth century, Karl Polanyi concludes that capitalism did not emerge until the Poor Law Reform Act of 1834. Capital existed in many forms—commercial capital and money-dealing capital—long before industrialization. For this reason the period between the sixteenth and eighteenth centuries is often referred to as the merchant capital phase of capitalism. Industrial capitalism, which Marx dates from the last third of the eighteenth century, finally establishes the domination of the capitalist mode of production.

For most analysts, mid- to late-nineteenth-century Britain is seen as the apotheosis of the laissez-faire phase of capitalism. This phase took off in Britain in the 1840s with the Repeal of the Corn Laws, and the Navigation Acts, and the passing of the Banking Act. In line with the teachings of classical political economy (Adam Smith and David Ricardo), the state adopted a liberal form which encouraged competition and fostered the development of a ‘self-regulating’ market society. Liberal and conservative thinkers have been keen to identify this particular phase of capitalism with the essence of capitalism itself. This has encouraged some theorists to dispense with the term completely when describing societies in the post-1945 period. Hence during the post-war long boom (1950-70), an explosion of terms—industrial society; post-industrial society; welfare statism; post-capitalist society—threatened to displace the centrality of the concept of capitalism. The waves of economic and political crises experienced since this period, however, led many commentators to reinstate the term, particularly under the influence of the new right (Hayek and Friedman). In contrast to liberals, writers in the Marxist tradition understand twentieth-century developments in terms of the movement from the laissez-faire phase of capitalism to the monopoly stage of capitalism. On the basis of Lenin's famous pamphlet, Imperialism: The Highest Stage of Capitalism, the monopoly stage is said to exist when: the export of capital alongside the export of commodities becomes of prime importance; banking and industrial capital merge to form finance capital; production and distribution are centralized in huge trusts and cartels; international monopoly combines of capitalists divide up the world into spheres of interest; and national states seek to defend capitalist interests thus perpetuating the likelihood of war (see also imperialism).
Since the extension of the franchise in nineteenth-century Britain there has been a hotly contested debate on the relationship between democracy and capitalism. The experience of the twentieth century, however, shows that there are a variety of political forms—liberal democratic, social democratic, fascist, statist, republican, monarchical—which can accompany capitalist economies. This constitutes the basis for the study of the state in capitalism.
Although the world market has always formed the backdrop to the development of capitalism, a number of recent changes, associated with both the ‘globalization of capital’, and the demise of the Soviet Union, have strengthened the claim that capitalism should now be viewed as a world system. (See also Anglo-Saxon Capitalism, Rhenish Capitalism.)
— Peter Burnham

Oxford Dictionary of British History:
capitalism
Top
Home > Library > History, Politics & Society > British History
Capitalism is the name given to the market economy system, which did not come to full fruition until the restrictive practices of the medieval and mercantilist eras had been eroded. During the past two centuries world economic growth has been achieved very largely through the free market system and mainstream economic theory has provided theoretical justification for it. But it has also been subject to sustained criticism, both in the mild form that its inherent limitations required that it should be modified by government intervention and, at the extreme, that its inherent flaws would ensure its eventual collapse.
The positive case for free market capitalism is based on the liberty of individuals to pursue their objectives subject only to the constraint of law. The competitive environment, idealized in perfect competition, represents the most efficient structure. Such a structure implies that all participants benefit: competition weeds out inefficient producers and ensures that consumers pay the lowest possible price.
It is, of course, generally recognized that this is not an entirely accurate description of either the modern economy or its precursors. A range of obstacles inhibits the free working of markets. Monopoly power constitutes such an obstacle. Another type of perceived imperfection has been the interference of government policy. Monetarist theorists like Friedman have explained inflation as the result of weak control of the monetary system by the state. According to this perspective, the market system is totally satisfactory provided various imperfections can be eliminated. But one area of difficulty lies in the provision of public goods by the state because market failure means they are not adequately supplied by private producers. Examples include transport networks, law and order, welfare benefits, defence, health, and education. The difficulty lies in the fact that payment is indirect, through taxation.
More familiar criticisms have come from those whose vision of capitalism is not of an ideal state marred temporarily by imperfections. The Keynesian tradition, following the work of John Maynard Keynes, made the basic assumption that the market system needs to be managed by the state because it will seldom produce outcomes optimal for society as a whole. Adherents to this tradition believe, for example, that state intervention can reduce unemployment and generate economic growth. A far more radical view of capitalism is taken by Marxists. Marx argued that capitalism was based not on complementarity of interest but upon conflict between the classes. Further, he argued, capitalism contained the seeds of its own destruction through that conflict. The acquisition of colonies was one means of postponing eventual collapse by securing new and additional markets. Others have explained the continued failure of the capitalist world to collapse, as predicted by Marx, as a result of artificial demand created by governments in the form of military expenditure.

Oxford Dictionary of Philosophy:
capitalism
Top
Home > Library > History, Politics & Society > Philosophy Dictionary
Mode of socioeconomic organization in which a class of entrepreneurs and entrepreneurial institutions provide the capital with which businesses produce goods and services and employ workers. In return the capitalist extracts profits from the goods created. Capitalism is frequently seen as the embodiment of the market economy, and hence may result in the optimum distribution of scarce resources, with a resulting improvement for all; this optimism is countered by pointing to the opportunity for exploitation inherent in the system.

Gale Encyclopedia of US History:
Capitalism
Top
Home > Library > History, Politics & Society > US History Encyclopedia
Capitalism is an economic system dedicated to production for profit and to the accumulation of value by private business firms. In the fully developed form of industrial capitalism, firms advance money to hire wage laborers and to buy means of production such as machinery and raw materials. If the firm can sell its products for a greater sum of value than that originally advanced, the firm grows and can advance more money for a new round of accumulation. Historically, the emergence of industrial capitalism depends upon the creation of three prerequisites for accumulation: initial sums of money (or credit), wage labor and means of production available for purchase, and markets in which products can be sold.
Industrial capitalism entails dramatic technical change and constant revolution in methods of production. Prior to the British Industrial Revolution of the eighteenth and early nineteenth centuries, earlier forms of capital in Europe—interest-bearing and merchant capital—operated mainly in the sphere of exchange. Lending money at interest or "buying cheap and selling dear" allowed for accumulation of value but did not greatly increase the productive capabilities of the economic system. In the United States, however, merchant capitalists evolved into industrial capitalists, establishing textile factories in New En-gland that displaced handicraft methods of production.
Capitalism is not identical with markets, money, or greed as a motivation for human action, all of which predated industrial capitalism. Similarly, the turn toward market forces and the price mechanism in China, Russia, and Eastern Europe does not in itself mean that these economies are becoming capitalist or that all industrial economies are converging toward a single form of economic organization. Private ownership of the means of production is an important criterion. Max Weber stressed the rational and systematic pursuit of profit and the development of capital accounting by firms as key aspects of modern capitalism.
In the United States the three prerequisites for capitalist accumulation were successfully created, and by the 1880s it surpassed Britain as the world's leading industrial economy. Prior to the Civil War, local personal sources of capital and retained earnings (the plowing back of past profits) were key sources of funds for industry. Naomi Lamoreaux has described how banks, many of them kinship-based, provided short-term credit and lent heavily to their own directors, operating as investment clubs for savers who purchased bank stock to diversify their portfolios. Firms' suppliers also provided credit. Capital from abroad helped finance the transport system of canals and railroads.
During the Civil War, the federal government's borrowing demands stimulated development of new techniques of advertising and selling government bonds. After the war, industry benefited from the public's greater willingness to acquire financial securities, and government debt retirement made funds available to the capital market. In the last decades of the century, as capital requirements increased, investment banks emerged, and financial capitalists such as J. P. Morgan and Kuhn, Loeb and Company organized finance for railroads, mining companies, and large-scale manufacturers. However, U.S. firms relied less on bank finance than did German and Japanese firms, and, in many cases, banks financed mergers rather than New investment.
Equity markets for common stock grew rapidly after World War I as a wider public purchased shares. Financial market reforms after the crash of 1929 encouraged further participation. However, internal finance remained a major source of funds. Jonathan Baskin and Paul Miranti noted (p. 242) that between 1946 and 1970 about 65 percent of funds acquired by nonfinancial corporate businesses was generated internally. This figure included retained earnings and capital consumption allowances (for depreciation). Firms' external finance included debt as well as equity; their proportions varied over time. For example, corporate debt rose dramatically in the late 1980s with leveraged buyouts, but in the 1990s net equity issuance resumed.
Labor for U.S. factories in the nineteenth century came first from local sources. In textiles, whole families were employed under the Rhode Island system; daughters of farm households lived in dormitories under the Waltham system. Immigration soared in the 1840s. Initially, most immigrants came from northern and western Europe; after 1880, the majority were from southern and eastern Europe. After reaching a peak in the decade before World War I, immigration dropped off sharply in the 1920s–1930s. It rose again in the 1940s and continued to climb in subsequent decades. The origins of immigrants shifted toward Latin America, the Caribbean, and Asia. Undocumented as well as legal immigration increased. For those lacking legal status, union or political activity was especially risky. Many were employed in the unregulated informal economy, earning low incomes and facing poor working conditions.
Thus, although an industrial wage labor force was successfully constituted in the United States, its origins did not lie primarily in a transfer of workers from domestic agriculture to industry. Gavin Wright (1988, p. 201) noted that in 1910 the foreign born and sons of the foreign born made up more than two-thirds of the laborers in mining and manufacturing. Sons of U.S. family farmers migrated to urban areas that flourished as capitalism developed, but many moved quickly into skilled and supervisory positions in services as well as industry, in a range of occupations including teachers, merchants, clerks, physicians, lawyers, bookkeepers, and skilled crafts such as carpentry. Black and white sharecroppers, tenant farmers, and wage laborers left southern agriculture and found industrial jobs in northern cities, particularly during World War II. But by the 1950s, job opportunities were less abundant, especially for blacks.
Family farms using family labor, supplemented by some wage labor, were dominant in most areas outside the South throughout the nineteenth century. But in the West and Southwest, large-scale capitalist agriculture based on wage labor emerged in the late nineteenth century. Mechanization of the harvest was more difficult for fruits, vegetables, and cotton than for wheat, and a migrant labor system developed, employing both legal and undocumented workers. In California a succession of groups was employed, including Chinese, Japanese, Mexican, and Filipino workers. Labor shortages during World War I led to federal encouragement of Mexican immigration, and Mexicans remained predominant in the 1920s. They were joined in the 1930s by migrants from Oklahoma and other Plains and southern states. Federal intervention during World War II and the 1950s established bracero programs to recruit Mexican nationals for temporary agricultural work.
An extraordinary home market enabled U.S. capitalists to sell their products and enter New rounds of accumulation. Supported by the Constitution's ban on inter-state tariffs, preserved by Union victory in the Civil War, and served by an extensive transportation and communication network, the U.S. market by the 1870s and 1880s was the largest and fastest-growing in the world. Territorial acquisitions included the Louisiana Purchase of 1803, which nearly doubled the national territory, and the Mexican cession, taken by conquest in 1848 and including the area that became California. Although some acquisitions were peaceful, others illustrate the fact that capitalist development entailed violence and nonmarket coercion as well as the operation of market forces. Growth in government spending, particularly during and after World War II, helped ensure that markets and demand were adequate to sustain accumulation.
According to Alfred Chandler, the size and rate of growth of the U.S. market opened up by the railroads and telegraph, together with technological changes that greatly increased output, helped spawn the creation from the 1880s of the modern industrial enterprise, a distinctive institutional feature of managerial capitalism. Using the "visible hand" of salaried managers, large firms coordinated vast quantities of throughput in a sequence of stages of mass production and distribution. Chandler thought these firms were more efficient than their competitors, but other scholars argued their dominance rested at least partly on the deliberate creation of barriers to entry for other firms. These included efforts to monopolize raw materials and other practices restricting competition, such as rebates, exclusive dealing, tariffs, patents, and product differentiation.
Technological changes included the replacement of handicraft methods using tools and human or animal power by factories with specialized machinery and centralized power sources. Nineteenth-century U.S. capitalism was notable for two industrial processes: the American System of interchangeable parts, which eliminated the need for skilled workers to file parts (of firearms, for example) to fit together as they did in Britain; and continuous-process manufacture in flour mills and, later, factories with moving assemblies such as automobile factories. Public sector institutions played an important role in some technological developments. The Springfield armory promoted interchangeable parts in the early nineteenth century. Government funding of research and development for industry and agriculture assisted private accumulation by capitalist firms in the twentieth.
Organizational and technological changes meant that the labor process changed as well. In the last decades of the nineteenth century, firms employed semiskilled and unskilled workers whose tasks had been reduced to more homogenized activity. Work was closely supervised by foremen or machine paced under the drive system that many firms employed until the 1930s. "Scientific management," involving detailed analysis of individual movements, optimum size and weight of tools, and incentive systems, was introduced, and an engineering profession emerged.
In the early twentieth century, "welfare capitalism" spread as some firms provided leisure activities and benefits, including profit sharing, to their workers, partly to discourage unionization and reduce labor turnover. As Sanford Jacoby documented, higher worker morale and productivity were sought through new personnel management policies such as job promotion ladders internal to firms. Adoption of bureaucratic employment practices was concentrated in times of crisis for the older drive system—World War I and the Great Depression. In the 1930s, union membership also expanded beyond traditional craft unions, as strike tactics and the rise of industrial unions brought in less skilled workers. During and after World War II, union recognition, grievance procedures, and seniority rules became even more widespread. Capitalism rewarded relatively well those in primary jobs (with good wages, benefits, opportunities for promotion, and greater stability). But segmented labor markets left many workers holding secondary jobs that lacked those qualities.
Capitalism, the State, and Speculation
Capitalism involves a combination of market forces, non-market forces such as actions by the state, and what can be termed hypermarket forces, which include speculative activities motivated by opportunities for large, one-time gains rather than profits made from the repeated production of the same item. In some cases state actions created opportunities for capital gains by private individuals or corporations. In the United States, federal land grants to railroad companies spurred settlement and economic development in the West in the nineteenth century. Profits often were anticipated to come from increases in land values along railroad routes, particularly at terminal points or junctions where towns might grow, rather than from operating the railroads.
Similarly, from the mid-twentieth century, federal highway and dam construction and defense spending underpinned city building and capitalist development in the southern and western areas known as the U.S. Sun Belt. In the 1980s, real estate speculation, particularly by savings and loan institutions, became excessive and a threat to the stability of the system rather than a positive force. The corporate merger and takeover wave of the 1980s also showed U.S. capitalism tilting toward a focus on speculative gains rather than on increases in productive efficiency.
In the judicial sphere, the evolution of legal doctrines and conceptions of property in the United States during the nineteenth century promoted capitalist development. As Morton Horwitz explained, in earlier agrarian conceptions, an owner was entitled to absolute dominion and undisturbed enjoyment of a property; this could block economically productive uses of neighboring properties. At the end of the eighteenth century and beginning of the nineteenth century, the construction of mills and dams led to legal controversies over water rights that ultimately resulted in acceptance of the view that property owners had the right to develop properties for business uses. The taking of land by eminent domain facilitated the building of roads, canals, and railroads. Legal doctrines pertaining to liability for damages and public nuisance produced greater predictability, allowing entrepreneurs to more accurately estimate costs of economic improvements. Other changes affected competition, contracts, and commercial law. Horwitz concluded that by around 1850 the legal system had become much more favorable to commercial and industrial groups.
Actions by the state sometimes benefited industrial capitalism as an unintended consequence of other aims. Gavin Wright argued that New Deal farm policies of the 1930s, designed to limit cotton production, undermined the sharecropping system in the U.S. South by creating incentives for landowners to switch to wage labor. Along with minimum wage legislation, the demise of sharecropping led the South to join a national labor market, which fostered the region's development. Elsewhere, capitalist development was an explicit goal. Alice Amsden showed that beginning in the 1960s, the South Korean state successfully forged a reciprocal relation with firms, disciplining them by withdrawing subsidies if export targets were not met. It set priorities for investment and pursued macroeconomic stabilization policies to support industrialization.
State action also affected the relationship between capital and labor. In the United States, federal and state governments fiercely resisted unions during the late nineteenth century with injunctions and armed interventions against strikes. Federal legislation of the 1930s and government practices during World War II assisted unions in achieving greater recognition and bargaining power. But right-to-work laws spread in southern and western states in the 1940s and 1950s, the 1947 Taft-Hartley Act was a major setback for labor, and the federal government turned sharply against unions in the 1980s.
Varying combinations of ordinary market forces, state action, and speculative activity generated industrial capitalism by the late twentieth century in an increasing but still limited group of countries. Western Europe, which had seen a protracted transition from feudalism to capitalism, was joined in the nineteenth and early twentieth centuries by white settler colonies known as "regions of recent settlement," such as the United States, Canada, Australia, and New Zealand. Argentina and South Africa shared some features with this group. Capitalism in regions of recent settlement was less a transformation of existing economic structures than an elimination of native populations and transfer of capital, labor, and institutions from Europe to work land that was abundantly available within these regions.
However, capitalism was not simply imported and imposed as a preexisting system. Scholars have debated whether farmers in New England and the Middle Atlantic region in the seventeenth to nineteenth centuries welcomed or resisted the spread of markets and the extent to which accumulation of wealth motivated their actions. In their ownership of land and dependence on family labor they clearly differed from capitalist farms in England whose proprietors rented land and hired wage labor. Holding the independence of the farm household as a primary goal, these U.S. farmers also were determined to avoid recreating a European feudal social structure in which large landowners held disproportionate economic and political power.
A final group of late industrializers—Japan from the late nineteenth century and, after World War II, Korea, Taiwan, Brazil, India, Turkey, and possibly Mexico—took a path to capitalism based on what Amsden called "industrialization through learning." Like European late-comers such as Germany, Italy, and Russia, these countries took advantage of their relatively backward status. Generally, they borrowed technology rather than inventing or innovating, although Germany did innovate and Japan became capable of innovation in some areas.
Some late industrializers relied heavily on exports and benefited from participation in the international economy. But home markets were also important, and among the most successful Asian countries were those with

land reforms and relatively equal income distributions. In this respect they resembled regions of recent settlement that were not dominated by concentrated landownership. For countries in the periphery, moreover, industrial capitalism could be fostered by delinking from the international economy. Some Latin American countries and Egypt saw their manufacturing sectors strengthen when the crises of the 1920s–1930s weakened their ties with the center. Delinking allowed them to follow more expansionary monetary and fiscal policies during the Great Depression than did the United States.
Capitalist and Noncapitalist Forms of Organization
The development of capitalism and free wage labor was intimately bound up with unfree labor forms and political subordination. Coexistence of capitalist forms with noncapitalist forms has continued into the twentieth century. Immanuel Wallerstein argued that during 1450–1640, a capitalist world-economy emerged that included very different labor forms: free labor (including yeoman farmers) in the core, slavery and coerced cash-crop labor in the periphery, and sharecropping in the semiperiphery. From the sixteenth to the nineteenth centuries, the Baltic grain trade provided food for western European cities while intensifying serfdom in eastern Europe. Eighteenth-century sugar plantations in the Caribbean using African slaves bought manufactured exports from Britain and food from the New England and Middle Atlantic colonies, which also then could import British manufactures.
In the United States, slavery, sharecropping, and petty production were noncapitalist forms that interacted with capitalist forms. Petty production is small-scale production that can be market-oriented but is not capitalist. It relies primarily on individual or family labor rather than wage labor, and producers own their means of production. Slavery, sharecropping, and petty production were especially important in agriculture, although some slaves were used in industry and the factory system did not universally eliminate artisan producers in manufacturing. In some sectors, specialty production by petty producers in industrial districts coexisted with mass production of more standardized products. Slaves and, after the Civil War, sharecroppers in the U.S. South produced the cotton that helped make textiles a leading industrial sector in both Britain and the United States. Slave owners purchased manufactured products produced by northern firms. Capitalist production and free wage labor thus depended on noncapitalist production for a key input and for some of its markets.
Petty producers in U.S. agriculture participated in markets and accumulated wealth, but unlike capitalist firms, accumulation was not their primary motivation. According to Daniel Vickers, U.S. farm families from initial settlement to the beginnings of industrialization held an ideal of "competency"—a degree of comfortable independence. They did not seek self-sufficiency, although they engaged in considerable production for their own use. They sold some of their produce in markets and could be quite interested in dealing for profit but sought to avoid the dependence on the market implied by a lifetime of wage labor.
As David Weiman explained, over the life cycle of a successful farm family more family labor became available and farm capital increased, allowing the household to increase its income and purchase more manufactured commodities. Farm households existed within rural communities that had a mix of private and communal social relations, some of which tended to limit market production and private accumulation of wealth. But over time the activities of petty producers contributed to a process of primitive accumulation—accumulation based on pre-or noncapitalist social relations, in which capital does not yet create the conditions for its own reproduction—which ultimately undermined the system of petty production in rural communities.
Noncapitalist forms of organization also include household production by nonfarm families and production by the state. These spheres have been variously conceived as supporting capitalism (for example, by rearing and educating the labor force), financially draining and undermining capitalism (in the case of the state), or providing an alternative to capitalism. Household production shrank over the nineteenth and twentieth centuries as goods and services formerly provided within households were supplied by capitalist firms. Production by the state expanded with defense spending, the rise of the welfare state, and nationalization in Western Europe and Latin America. Some of these trends contributed to the shift from manufacturing to services that was an important feature of capitalist economies in the twentieth century.
In addition to depending on noncapitalist economic forms, capitalism involved political subordination both domestically and internationally. In some countries, labor unions were suppressed. Political subordination of India within the British Empire was central to the smooth operation of the multilateral trade and payments network underlying the "golden age" of world capitalism that lasted from the last third of the nineteenth century to the outbreak of World War I in 1914. India's purchases of cheap manufactures and invisibles such as government services led to a trade deficit with Britain. Its trade surplus with India gave Britain the means to buy from other European countries such as Germany and France, stimulating their industrialization. On the monetary side, control of India's official financial reserves gave Britain added flexibility in its role as the world's financial center.
Uneven Capitalist Development
Both on a world scale and within individual countries, capitalist development is uneven: spatially, temporally, and socially. Some countries grew rapidly while others remained poor. Industrial leadership shifted from Britain to Germany and the United States at the end of the nineteenth century; they in turn faced New challengers in the twentieth. Within countries, industrial regions boomed, then often declined as growth areas sprang up elsewhere.
The textile industry in New England saw widespread plant closings beginning in the 1920s, and employment plummeted between 1947 and 1957. Production grew in southeastern states and was an important source of growth in the 1960s–1970s. But in the 1980s, textile production began shifting to even lower-cost locations overseas. Deindustrialization in the Midwest became a national political issue in the 1970s, as firms in the steel, automobile, and other manufacturing industries experienced competition from late industrializers and other U.S. regions. Growth in Sun Belt states was due to new industries and services as well as the relocation of existing industries.
Similarly, capitalism has been punctuated over time by financial crashes and by depressions with large drops in real output and employment. Epochs of growth and relative stability alternated with periods of stagnation and disorder. U.S. capitalism saw panics in 1819, 1837, 1857, 1873, 1907, and other years; particularly severe depressions occurred in the 1870s, 1890s, and 1930s. The post–World War II boom unraveled after 1973. Productivity growth was less rapid, and growth in median family income slowed markedly. Within periods of depression or prosperity, the experience of different industries is highly uneven. As Michael Bernstein emphasized, even during the 1930s the U.S. petroleum and tobacco industries saw strong output growth, while the iron and steel, automobile, and rubber industries remained depressed.
Finally, capitalism has been associated with shifts in the position of social classes, and its effects on different groups of people have been enormously varied. The broad-brush picture for Europe includes the decline of a landed aristocracy whose wealth and status were land-based and inherited; the rise of a bourgeoisie or middle class of merchants, manufacturers, and professionals with earnings from trade and industry; and the creation of a working class of wage earners. The fate of the peasantry varied—it was eliminated in some countries (England) but persisted in others (France, Russia), with lasting implications for economic and political development.
This simple story requires qualification even for Britain, where scholars question whether the industrial bourgeoisie ever truly dominated and suggest that landed interests maintained their political presence in the late nineteenth and early twentieth centuries by allying with internationally oriented financial capital. In the United States and other regions of recent settlement, the class configuration included the sector of family farmers discussed above. One result was that debtor-creditor relationships were particularly important in generating social conflict and social movements in the United States.
Although one might expect the capital-labor relationship to be the main locus of conflict in capitalist economies, this was not always the case. The United States did have a long and at many times violent history of capital-labor conflict. Its labor movement succeeded in the twentieth century in achieving considerable material gains for unionized workers; it did not seriously limit capital's control over the production process. Although groups such as the Wobblies (Industrial Workers of the World) sought to overthrow capitalism in the years prior to World War I, the United States did not have a strong socialist movement that included labor, as did some European countries. Other groups, particularly farmers, were important in the United States in alliance with labor or on their own in opposing what they saw as negative effects of financial capital or monopoly.
Farmers typically incur debts to purchase inputs, machinery, or land. During times of deflation or economic downturn those debts become particularly difficult to service. In addition to opposing debt and tax collection and foreclosures, farmers supported monetary policies that would increase the amount of currency and generate inflation (which would erode the real value of their debts) rather than deflation. Armed resistance to debt collection occurred in 1786–1787 in Massachusetts (Shays's Rebellion) and other states. After the Civil War, a long period of deflation lasting until about 1896 led farmers to join farmers' alliances and the Populist Party, which united with silver producers and greenbackers in calling for increases in the money supply. Although there were some concessions to these forces, the defeat of William Jennings Bryan by William McKinley in the presidential election of 1896 signaled the triumph of "sound money" advocates.
The Populists, like other third-party movements in the United States, did not succeed in becoming a governing party, but they were an important source of agitation, education, and New ideas. Many Populist proposals eventually became law, including railroad regulation, the income tax, an expanded currency and credit structure, postal savings banks, and political reforms. While some criticize Populist efforts to redistribute income and wealth, others celebrate the alternative vision of a more democratic capitalism that these farmers and laborers sought to realize.
Conclusion
Capitalism has had a two-sided character from its inception. Free wage labor coincided with unfreedom. Although capitalism eventually delivered greatly improved standards of living, its impact on people's lives as producers rather than consumers often was less positive. Jobs were deskilled, working conditions could be dangerous, and independence and decision-making were transferred to the employer. With changes in technology and industrial location, new workers were drawn in but old workers were permanently displaced. Rapid economic growth produced harmful environmental effects. Large-scale firms contributed to rising productivity but created potentially dangerous concentrations of economic and political power. Evolution of banking and financial institutions both aided growth and added a source of potential instability to the economic system.
Eliminating negative features of capitalism while preserving positive ones is not a simple or straightforward matter. As Robert Heilbroner observed, a medical metaphor is inappropriate. It is not possible to "cure" capitalism of its diseases and restore it to full health. Moreover, measures that eliminate one problem can help produce the next. For example, if government spending and transfers provide a "floor" to soften depressions, inflationary tendencies can result. But a historical perspective helps underscore the fact that capitalism is not an immutable system; it has changed in the past and can continue to do so in the future.
Bibliography
Amsden, Alice H. Asia's Next Giant: South Korea and Late Industrialization. New York: Oxford University Press, 1989.
Baskin, Jonathan Barron, and Paul J. Miranti Jr. A History of Corporate Finance. Cambridge, U.K.: Cambridge University Press, 1997.
Bernstein, Michael A. The Great Depression: Delayed Recovery and Economic Change in America, 1929–1939. Cambridge, U.K.: Cambridge University Press, 1987.
Braverman, Harry. Labor and Monopoly Capital: The Degradation of Work in the Twentieth Century. New York: Monthly Review Press, 1974.
Chandler, Alfred D., Jr. The Visible Hand: The Managerial Revolution in American Business. Cambridge, Mass.: Belknap Press, 1977.
Gerschenkron, Alexander. Economic Backwardness in Historical Perspective: A Book of Essays. Cambridge, Mass.: Belknap Press, 1962.
Gordon, David M., Richard Edwards, and Michael Reich. Segmented Work, Divided Workers: The Historical Transformation of Labor in the United States. Cambridge, U.K.: Cambridge University Press, 1982.
Heilbroner, Robert. "Inflationary Capitalism." New Yorker 55, no. 34 (8 Oct. 1979): 121–141.
Horwitz, Morton J. The Transformation of American Law, 1780– 1860. Cambridge, Mass.: Harvard University Press, 1977.
Jacoby, Sanford M. Employing Bureaucracy: Managers, Unions, and the Transformation of Work in American Industry, 1900–1945. New York: Columbia University Press, 1985.
Kulikoff, Allan. The Agrarian Origins of American Capitalism. Charlottesville: University Press of Virginia, 1992.
Lamoreaux, Naomi. Insider Lending: Banks, Personal Connections, and Economic Development in Industrial New England. Cambridge, U.K.: Cambridge University Press, 1994.
Montgomery, David. The Fall of the House of Labor: The Workplace, the State, and American Labor Activism, 1865–1925. Cambridge, U.K.: Cambridge University Press, 1987.
Moore, Barrington, Jr. The Social Origins of Dictatorship and Democracy: Lord and Peasant in the Making of the Modern World. Boston: Beacon Press, 1966.
Nelson, Daniel. Managers and Workers: Origins of the Twentieth-Century Factory System in the United States, 1880–1920. 2d ed. Madison: University of Wisconsin Press, 1995.
Noble, David F. America by Design: Science, Technology, and the Rise of Corporate Capitalism. New York: Knopf, 1977.
Scranton, Philip. Endless Novelty: Specialty Production and American Industrialization, 1865–1925. Princeton, N.J.: Princeton University Press, 1997.
Vickers, Daniel. "Competency and Competition: Economic Culture in Early America." William and Mary Quarterly, 3d. Ser., 47, no. 1. (1990): 3–29.
Wallerstein, Immanuel. The Modern World-System: Capitalist Agriculture and the Origins of the European World-Economy in the Sixteenth Century. New York: Academic Press, 1974.
Weber, Max. The Protestant Ethic and the Spirit of Capitalism. New York: Scribners, 1958.
Weiman, David F. "Families, Farms and Rural Society in Pre-industrial America." In Agrarian Organization in the Century of Industrialization: Europe, Russia, and North America. Edited by George Grantham and Carol S. Leonard. Research in Economic History, Supplement 5 (Part B). Greenwich, Conn.: JAI Press, 1989.
Weir, Margaret, and Theda Skocpol. "State Structures and the Possibilities for 'Keynesian' Responses to the Great Depression in Sweden, Britain, and the United States." In Bringing the State Back In. Edited by Peter B. Evans, Dietrich Rueschemeyer, and Theda Skocpol. Cambridge, U.K.: Cambridge University Press, 1985.
Wright, Gavin. Old South, New South: Revolutions in the Southern Economy since the Civil War. New York: Basic Books, 1986.
———. "American Agriculture and the Labor Market: What Happened to Proletarianization?" Agricultural History 62, no. 3 (1988): 182–209.
—Carol E. Heim

Gale Encyclopedia of Russian History:
Capitalism
Top
Home > Library > History, Politics & Society > Russian History Encyclopedia
Max Weber offered a value-free definition of modern capitalism: an economic system based on rational accounting for business, separate from the personal finances of an individual or family; a free market open to persons of any social status; the application of advanced technology, especially in large enterprises that required significant amounts of invested capital; a legal system providing equal treatment under the law, without arbitrary exceptions, and ensuring protection of the right of private property; a flexible labor market free of impediments to social mobility, such as slavery and serfdom, and of legal and institutional restrictions, such as minimum-wage laws and labor unions; and the public sale of shares to amass significant amounts of investment capital. Although no economy in world history has ever attained perfection in any of these six dimensions, social science can determine the extent to which economic institutions in a given geographical and historical situation approached this abstract "ideal type."
The institutions of modern capitalism - corporations, exchanges, and trade associations - evolved in Europe from the High Middle Ages (1000 - 1300) onward. Corporations eventually appeared in the Russian Empire in the reign of Peter I, and by the late nineteenth century the tsarist government had permitted the establishment of exchanges and trade associations. However, the vast size of the country, its location on the eastern periphery of Europe, the low level of urbanization, the persistence of serfdom until 1861, and the late introduction of railroads and steamship lines slowed the diffusion of capitalist institutions throughout the country.
The autocratic government, which had survived for centuries by wringing service obligations from every stratum of society, viewed capitalist enterprise with ambivalence. Although it recognized the military benefits of large-scale industrial activity and welcomed the new source of taxation represented by capitalist enterprise, it refused to establish legal norms, such as the protection of property rights and equality before the law, that would have legitimized the free play of market forces and encouraged long-term, rational calculation. As Finance Minister Yegor F. Kankrin wrote in March 1836: "It is better to reject ten companies that fall short of perfection than to allow one to bring harm to the public and the enterprise itself." Every emperor from Peter I onward regarded the principle of a state based on the rule of law (Rechtsstaat; in Russian, pravovoye gosudarstvo) as a fatal threat to autocratic power and to the integrity of the unity of the multinational Russian Empire.
The relatively weak development of capitalist institutions in Russia, their geographical concentration in the largest cities of the empire, and the prominence of foreigners and members of minority ethnic groups (Germans, Poles, Armenians, and Jews, in that order) in corporate enterprises led many tsarist bureaucrats, peasants, workers, and members of the intelligentsia to resent capitalism as an alien force. Accordingly, much of the anticapitalist rhetoric of radical parties in the Russian Revolutions of 1905 and 1917 reflected traditional Russian xenophobia as much as the socialist ideology.
Bibliography
Gatrell, Peter. (1994). Government, Industry, and Rearmament in Russia, 1900 - 1914: The Last Argument of Tsarism. New York: Cambridge University Press.
Owen, Thomas C. (1991). The Corporation under Russian Law, 1800 - 1917: A Study in Tsarist Economic Policy. New York: Cambridge University Press.
Roosa, Ruth A. (1997). Russian Industrialists in an Era of Revolution: The Association of Industry and Trade, 1906 - 1917, ed. Thomas C. Owen. Armonk, NY: M.E. Sharpe.
Weber, Max. (1927). General Economic History, tr. Frank H. Knight. New York: Greenberg.
—THOMAS C. OWEN

Columbia Encyclopedia:
capitalism
Top
Home > Library > Miscellaneous > Columbia Encyclopedia
capitalism, economic system based on private ownership of the means of production, in which personal profit can be acquired through investment of capital and employment of labor. Capitalism is grounded in the concept of free enterprise, which argues that government intervention in the economy should be restricted and that a free market, based on supply and demand, will ultimately maximize consumer welfare. These principles were most notably articulated in Adam Smith's treatise, The Wealth of Nations (1776), in which he opposed the prevailing theory of mercantilism. Capitalism has existed in a limited form in the economies of all civilizations, but its modern importance dates at least from the Industrial Revolution that began in the 18th cent., when bankers, merchants, and industrialists-the bourgeoisie-began to displace landowners in political, economic, and social importance and when innovations and efficiencies in commercial agriculture made available a large body of surplus labor, particularly in Great Britain. Capitalism stresses freedom of individual economic enterprise; however, government action has been and in some cases remains required to curb its abuses, which have ranged from terrible working conditions, slavery (particularly in Britain and the United States), and apartheid (in South Africa) to monopoly cartels and financial fraud.
Capitalism does not presuppose a specific form of social or political organization: the democratic socialism of the Scandinavian states, the consensus politics of Japan, and the state-sponsored rapid industrial growth of South Korea while under military dictatorship all have coexisted with capitalism. Yet despite the capitalist ideal of "hands-off" government, significant government intervention has existed in most capitalist nations at least since the Great Depression in the 1930s. In the United States, it exists in the form of subsidies, tax credits, incentives, and other types of exemptions. Though private production plays a major role in the economies of Germany and Japan, both nations have had centrally planned industrial policies in which bankers, industrialists, and labor unions meet and seek to agree to wage policies and interest rates; these countries reject the idea of letting the market wholly determine the economy. The collapse of the Soviet Union and its satellite states in Eastern Europe (1989-91) represented a substantial retreat in the power of capitalism's traditional economic opponent, socialism; while some of those nations have move toward free-market capitalism, in others the state retained or has reasserted its control over many aspects of the economy. In China, Communist economic principles were gradually abandoned during the late 20th cent. and capitalism became increasingly important-but within a strictly Communist political framework.
Bibliography
See M. Friedman, Capitalism and Freedom (1952, rev. ed. 1981); J. K. Galbraith, American Capitalism (1952, repr. 1982); J. A. Schumpeter, Capitalism, Socialism, and Democracy (1983); R. L. Heilbroner and L. C. Thurow, Economics Explained (1987); C. R Sunstein, Free Markets and Social Justice (1997); J. Appleby, The Relentless Revolution: A History of Capitalism (2010).

--------------------------------------------------------------------------------

Gale Encyclopedia of the Early Modern World:
Capitalism
Top
Home > Library > History, Politics & Society > History 1450-1789
Europe went through remarkable economic transformations between 1500 and 1800, including agricultural change, urbanization, industrial development, commercial expansion, and growing financial sophistication. Capital was accumulated and productively invested; it helped to create (and became increasingly essential to) the new forms of social organization used to exploit economic opportunities. Labor became more of a commodity to be bought and sold. Occupational diversification proceeded alongside a growing polarization of wealth, creating a large group of wage-dependent laborers and an emerging, but increasingly assertive, middle class that embraced the productive ideal.
These changes were once thought to be associated with a fundamental transition from one type of economic, social, and political form (feudalism) to another (capitalism). However, economic change in early modern Europe is better conceived as a changing balance between sectors and regions, some of which moved rapidly, others only slowly. Overlapping (if sometimes contradictory) forces helped Europe to become more capitalist over time, but noncapitalist forms existed alongside this trend and shaped the path it took.
Different degrees of capitalism coexisted in constantly changing alignments from the Middle Ages to the nineteenth century, and all regions of Europe had some dynamism at some periods. The richest "core" parts of Europe in 1500 were the lands ruled by the Habsburgs in Spain, northern Italy, southern Germany, and the Low Countries. Northern Europe was, by comparison, economically peripheral. By 1650 the economic hub of Europe had shifted irrevocably to the northwest seaboard, leaving the Mediterranean as the "periphery."
Commercial Capitalism
At the end of the Middle Ages, Europe's largely subsistence economies were small, fragmented, and lacking dynamism. Demand was slack, and what trade existed was in foodstuffs and a few luxuries. Goods needed an expanding market, which extralocal commerce seemed to provide by short-circuiting some of the inherent constraints on economic growth. Thus began greater intra-European trade and, crucially, the voyages of discovery, which—for better or worse—brought Europeans into direct contact with the wider world. Supplies of new goods were brought to Europe, and new demands were created: for commodities like sugar, tea, and tobacco, and for semidurables like crockery or cotton and silk clothes. European manufactures found new markets abroad.
It was once thought that the profits so earned were concentrated in the hands of capitalists, who helped to fund further economic development. Direct and indirect benefits accrued. Production for exchange rather than use became the norm, and with it a specialization of function, or "division of labor." Successful merchants could diversify into industry. Transportation and transaction costs would be reduced by innovations in carrying. Ships had to be built, outfitted, and victualed, further stimulating production and technological innovation. Long-term credit, changes in the law on multiple ownership, which made possible "joint-stock companies," and increasingly sophisticated exchange facilities (including banknotes) fostered the rational and systematic maximization of net returns, which is a keynote of capitalism.
Historians conventionally believed that international trade, especially with the New World, was the prime force behind the primitive accumulation of capital, leading eventually to the industrial and commercial revolutions of the nineteenth century. Certain significant mercantile groups in the towns of northwest Europe benefited, but the overall stimulus to early capitalism should not be exaggerated. Overseas commerce was a risky business involving no more than one percent of European production. Dynamic and glamorous as international trade may seem, more mundane aspects of early modern economic life need to be considered. In order of numbers employed, commerce came a long way behind agriculture and industry. Once thought less dynamic than trade, the agricultural world in particular had considerable potential for economic change because of the nature of social class relations in some areas of rural Europe.
Agrarian Capitalism
Social status and wealth in rural Europe were determined by the legal rights people had to the land they worked and consequently by their share of the surplus they extracted. Some parts of Europe had many peasant proprietors, but mostly the land was owned by a few rich people and worked by "tenant" farmers and landless or land-poor laborers. In France the political needs of the late-medieval French crown led it to foster peasant proprietorship. This created a substantial body of semi-independent peasantry, but they were generally poor, and the rural economy was relatively immobile. Scandinavia was similar. In contrast, the English peasantry was politically weaker, and independent freeholders were gradually turned into tenant farmers. This facilitated subsequent social change (expropriation) and economic improvements (based ultimately on consolidation of holdings) required for capitalism. Ownership of the means of production became concentrated in fewer hands, landholding units became larger, and specialized techniques were introduced to raise yields. Thus, fluid social relations of production were adapted to capitalism, and other, increasingly capitalistic, means of raising net profitability were introduced.
This is true of parts of northwest Europe, notably England. Yet a simple imbalance of power relationships in favor of the owners of the means of production did not necessarily promote capitalist development. Powerful landowners east of the River Elbe reacted to growing western demands for grain during the sixteenth-century population expansion by exploiting more intensively their feudal privileges over serf labor. For example, the rights of Russian lords over their peasants were consolidated and extended by comprehensive laws passed in 1649. Serfdom in the east was characterized by restricted personal freedom and the exploitation of the peasantry by legal and political rather than purely economic means. Labor power had not been turned into a simple commodity for, in addition, the relation between capital and labor retained a personal dimension, and workers had means of support other than selling their labor. The experience of eastern Europe is a reminder that a commercialized economy is not the same as a capitalist economy. It also shows that economic change did not always bring with it more capitalistic forms of social organization and that a polarized society is not necessarily a capitalist one.
Industrial Capitalism
Commercial explanations of capitalist development, which focus on extrinsic forces, may underestimate the internal dynamism of European agriculture, industry, and towns. Some regions of Europe had been net importers of food and exporters of finished products since the Middle Ages. The economically dynamic northern Italian city-states are an example in the late Middle Ages. During the sixteenth century, the Dutch imported as much as a third of their grain needs from the Baltic, allowing specialization within pastoral agriculture alongside a level of urbanization and industrial employment that would have been unthinkable if their economy had been closed.
Just as some regions depended on trade, so too did most European families. Far from being merely self-sufficient, production for exchange was common. It is unlikely that most households made items such as clothes for their own use, because the manufacturing process from raw material to finished garment was far too complicated and time-consuming. Even in the more isolated economies there was a considerable degree of specialization and therefore exchange. Incomes fluctuated, but in good times there were surpluses to spend on marketplace purchases. Thus, there were opportunities for growth and change even within "traditional" economies.
Factories and capitalism are conventionally linked, but most early modern industrial production was located in the home and in the countryside: it is commonly known as "cottage industry." Across northwest Europe between a sixth and a third of all men living in the countryside were primarily employed in nonagricultural jobs such as textile manufacture. These rural domestic producers were both independent artisans producing for local markets and dependent employees whose work might reach extralocal markets. The latter form is known as "putting-out," and its advantage to capitalists was that it was cheap and flexible. Breaking free of guild restrictions on quality, price, and employment, urban merchant entrepreneurs were able to find plenty of eager workers among the underemployed poor of rural Europe. In the major cloth-producing areas such as Picardy in northeast France or the English West Country, these entrepreneurs bought raw wool or flax to be prepared and spun into yarn. They then gave the yarn to specialist weavers and bought back the cloth, which was taken for finishing and finally for selling, often in national or international markets. Urban specialists added more value to the product by dyeing cloth and tailoring it, but the majority of ordinary woolen and linen fabric was made in the countryside.
Putting-out thus embodied important capitalistic elements. Capital was controlled not by individual workers, but by entrepreneurs; the production process involved a clear division of labor; workers were paid wages, for, while some might own their own looms, the only commodity they were selling was their labor; and goods were sold in nonlocal markets. Capitalism is ultimately defined, as Karl Marx (1818–1883) argued, not by the performance of an economy, but by its specific relations of production between capital and labor. However, small-scale production organized by master weavers rather than merchants continued to characterize the woolen-cloth industry of the seventeenth-century Low Countries. Even within a single English county like Yorkshire, putting-out and independent artisan cloth production coexisted. And rather than a linear progression from independence to dependence, workers sometimes moved back and forth between them.
Urban Capitalism
It is understandable that historians searching for early modern capitalism focused on agrarian change and on the agricultural origins of industry. Most Europeans lived on the land and it provided not only their subsistence, but also most of the raw materials for industry (wood, leather, and fibers for making cloth); apart from wind and water, energy came mainly from organic rather than mineral sources. Some 8 percent of all Europeans lived in towns of 10,000 or more in 1600 and 10 percent in 1800. Most of this growth can be accounted for by a trebling in England's proportion from under 6 percent to over 20 percent. London alone grew from 200,000 inhabitants to nearly 600,000 during the seventeenth century and to one million by 1800. As early as 1700 nearly a third of the Dutch lived in towns, but there and elsewhere in continental Europe the percentage did not grow any further. In eastern Europe the urban component remained minimal—as little as 3 percent in 1800.
Despite their often small size and low proportion of national population, towns were the motors of economic change. They functioned as centers of production (especially finishing and luxury goods), transportation and exchange; they provided legal, financial, and educational services; they served as bases for secular and ecclesiastical bureaucracies; they acted as communications nodes, providing verbal, written, and printed information; they offered increasingly sophisticated leisure facilities. Their impact was felt in all economic sectors. While productivity in French agriculture was generally low, the area around Paris had yields comparable with England; Dutch farming was highly advanced because of the large urban markets.
Towns and capitalism were not always connected. Towns helped to modernize the economies of northwestern Europe, but they had little effect on Russian agriculture, trade, and industry because they were simply military or administrative outposts in a sea of feudalism. Southern Italy had many towns, but they were essentially dormitories for farmers and did not offer the range of industrial, commercial, and service occupations found elsewhere in Europe. Some have even questioned whether the urban elites of seventeenth- and eighteenth-century France were "bourgeois" in any meaningful sense. Most aspired to belong to the nobility and, when able, tried to ape their social norms and economic behavior—including a disdain for trade and a preference for conspicuous consumption. Yet throughout the period there was a strong association between urbanization and the development of different stages of capitalism—in northern Italy, then the Netherlands, then England.
Ideologies of Capitalism
Towns were hothouses of capitalist development, but other factors also nourished the acquisitive and productive ideal. From the mid-sixteenth century Calvinism appealed to those who believed that wealth was a sign of God's favor and that glorifying God could be done through acquisition. Yet some Calvinists believed it was wrong to exploit other people, and different faiths have also been credited with fostering capitalism: for example, Jews had traditionally been untroubled by Christian reservations about charging interest. Nor was Catholicism an enemy of financial sophistication, for north Italian bankers dominated the commercial and public finances of the fifteenth-century Mediterranean world. Literacy and numeracy had also been high in this region, especially in the cities, during the Renaissance, but it was in the northwest of Europe that literacy developed most rapidly and extensively in the seventeenth and eighteenth centuries.
In the eighteenth century secular intelligentsia took up the banner of capitalism. Enlightenment thinkers analyzed, celebrated, and promoted getting and spending, arguing that commercial inter-course was one way of promoting the social interaction that was the basis of personal and societal improvement. Changes in attitude not only affected the owners of capital. An "industrious revolution," marked by a growing propensity to work in order to consume, fueled the demand side of growth. For many people, incomes and consumption rose. Marx thought that workers would labor more just to stand still, but the capitalism that developed in early modern Europe was fed by a desire not for subsistence, but for betterment, not for "needs," but for "wants." The consolidation and glorification of private property that occurred in the West was an important precondition of an "industrious revolution." In eastern Europe, by contrast, the idea of individual ownership of goods was subordinated to that of family or community interest.
While Enlightenment writers eventually functioned as the ideologues of nineteenth-century laissez-faire capitalism, they did not come from such an environment. A body of laws and assumptions about economic regulation, which were designed to promote social stability over individual gain, restricted the free market. At best, attitudes toward capitalism remained ambivalent. It was "virtuous" to engage in commerce, but only if market relations were equalized, competition was fair, and exchange therefore equitable. Throughout the early modern period, capitalism remained a contested terrain. Just as Calvinism had provided only contingent support for capitalism in the seventeenth century, Enlightenment thinkers saw property and gain entailing moral and civil obligations—both against a backdrop of enduring political support for intervention in support of a "moral economy."
The increasingly centralized territorial states might facilitate, protect, and exploit economic expansion and consolidation, but when there were competing interests, political priorities almost invariably outweighed capitalist ones. Countries like Spain ruined themselves on imperial commitments, although warfare did help indirectly to promote certain aspects of the development of capitalism. Nor were economic and political advantage the only policy considerations. Alongside sometimes rampant economic individualism there existed a greater or lesser commitment to social collectivism. Government policy recognized and encouraged capitalism, but it also tried so to structure its development as to limit its most destructive effects. For its victims there were poor-relief schemes revised and augmented from their medieval origins to cope with the many new vulnerabilities that capitalism brought.
Conclusion
Growth, decline, and stagnation coexisted in different sectors and regions of early modern Europe. The preconditions of and paths to progress differed, but the regions that did foster capitalism had shared characteristics. High levels of literacy and urbanization, sophisticated judicial systems, dense and long-established networks for exchanging goods and people, and technological advances unified the North Sea region and enabled it to progress at a faster rate. At the other end of the spectrum were southern and eastern Europe, where high production costs, inadequate transportation, extreme polarization of wealth, illiteracy, a small and undynamic urban sector, and heavy-handed political intervention inhibited economic change.
Change could also have very different implications. Involvement in European or world commerce was a social solvent in England and the Netherlands but involved a hardening of traditional relationships east of the Elbe. At every turn, existing social forms, cultural priorities, and political structures influenced the extent of economic change. Its effects were also contingent. Domestic arrangements and the cultural preferences that underlay them shaped the course of economic development at least as much as capitalism affected the family.
Incomplete as it was even in 1800, the development of a capitalist economy had progressed—albeit hesitantly—especially in and around the North Sea Basin. A proletariat, a class that had no means of subsistence other than wages, was emerging in town and country. From being a conglomeration of parceled regional economies, continent-wide exchanges of grain and of certain raw materials and manufactures helped to create a more unified entity. A rudimentary "world economy" was being founded. New products and new markets were outdating the mercantilist assumption of a "fixed cake." Ideas of intervention and stasis were being replaced by laissez-faire and dynamic growth as the balance of attitudes shifted in favor of capitalism. Capital was being accumulated and used in an increasingly sophisticated and productive way. Technological change had not yet broken down the barriers within traditional economies, making possible the exponential growth of the nineteenth and twentieth centuries, but labor productivity was rising. A fully capitalist European economy was in the making.
Bibliography
Aston, Trevor H., and C. H. E. Philpin, eds. The Brenner Debate: Agrarian Class Structure and Economic Development in Pre-Industrial Europe. Cambridge, U.K., and New York, 1985.
Braudel, Fernand. Civilization and Capitalism, 15th–18th Century. Translated by Siân Reynolds. 3 vols. London, 1981–1984.
De Vries, Jan. The Economy of Europe in an Age of Crisis, 1600–1750. Cambridge, U.K., 1976.
Duplessis, Robert S. Transitions to Capitalism in Early Modern Europe. New York, 1997.
Kriedte, Peter, Hans Medick, and Jürgen Schlumbohm. Industrialization before Industrialization: Rural Industry in the Genesis of Capitalism. Translated by Beate Schemp. Cambridge, U.K., 1981.
Macfarlane, Alan. The Origins of English Individualism: The Family, Property, and Social Transition. Oxford, 1978.
Prak, Maarten, ed. Early Modern Capitalism: Economic and Social Change in Europe, 1400–1800. New York, 2001.
Tilly, Charles. Coercion, Capital, and European States, A . D . 990–1990. Oxford, 1990.
Wallerstein, Immanuel. The Modern World-System. 3 vols. New York, 1974, 1980, 1989.
Wrightson, Keith. Earthly Necessities: Economic Lives in Early Modern Britain. New Haven, 2000.
—R. A. HOUSTON

Dictionary of Cultural Literacy: Politics:
capitalism
Top
Home > Library > History, Politics & Society > Politics
An economic and political system characterized by a free market for goods and services and private control of production and consumption. (Compare socialism and communism.)

Quotes About:
Capitalism
Top
Home > Library > Literature & Language > Quotes About
Quotes:
"Making capitalism out of socialism is like making eggs out of an omelet." - Vadim Bakatin
"Fact is Our Lord knew all about the power of money: He gave capitalism a tiny niche in His scheme of things, He gave it a chance, He even provided a first installment of funds. Can you beat that? It's so magnificent. God despises nothing. After all, if the deal had come off, Judas would probably have endowed sanatoriums, hospitals, public libraries or laboratories." - Georges Bernanos
"Capitalism without bankruptcy is like Christianity without hell." - Frank Borman
"The most eloquent eulogy of capitalism was made by its greatest enemy. Marx is only anti-capitalist in so far as capitalism is out of date." - Albert Camus
"Predatory capitalism created a complex industrial system and an advanced technology; it permitted a considerable extension of democratic practice and fostered certain liberal values, but within limits that are now being pressed and must be overcome. It is not a fit system for the mid-twentieth century." - Noam Chomsky
"The inherent vice of capitalism is the unequal sharing of blessings; the inherent vice of socialism is the equal sharing of miseries." - Winston Churchill

See more famous quotes about Capitalism

Wikipedia on Answers.com:

Capitalism
Top
Home > Library > Miscellaneous > Wikipedia
"Liberal market economy" redirects here. For the ideology behind this economic system, see Economic liberalism.
"Free Enterprise" redirects here. For the 1999 film, see Free Enterprise (film).
For other uses, see Capitalism (disambiguation).
Part of the series on
Capitalism

Concepts
Central bank
Commercial law
Companies law
Comparative advantage
Competition law
Consumer protection
Copyright
Corporations
Deregulation
Economic freedom
Economic liberalism
Financial regulation
Fiscal policy
Free market
Free price system
Free trade agreements
Freedom of contract
Globalization
Inflation
Intellectual property
Invisible hand
Labour law
Limited government
Market
Monetary policy
Monopoly
Oligopoly
Patents
Private property
Privatization
Regulated market
Recession
Spontaneous order
Stagflation
Supply and demand
Wage labour

Economic theories
Austrian school
Chicago school
Classical economics
Keynesian economics
New Keynesian economics
Marxian economics
Monetarism
Neoclassical economics
Supply-side economics
Institutional economics
New institutional economics

Origins
Age of Enlightenment
Feudalism
Industrial Revolution
Physiocrats
Mercantilism
Islamic capitalism

People
Ronald Coase
Milton Friedman
Friedrich Hayek
John Maynard Keynes
Alfred Marshall
Karl Marx
John Stuart Mill
Ludwig von Mises
Ayn Rand
David Ricardo
Joseph Schumpeter
Adam Smith
Thorstein Veblen
Max Weber

Variants
Anarcho-capitalism
Consumer capitalism
Corporate capitalism
Creative capitalism
Crony capitalism
Democratic capitalism
Eco-capitalism
Finance capitalism
Global capitalism
Humanistic capitalism
Inclusive capitalism
Late capitalism
Laissez-faire capitalism
Liberal capitalism
Merchant capitalism
Mixed economy
Monopoly capitalism
Neo-Capitalism
Philanthrocapitalism
Technocapitalism
Regulatory capitalism
Rentier capitalism
Social capitalism
Social market economy
State capitalism
State monopoly capitalism
Welfare capitalism

Related topics
Anti-capitalism
Advanced capitalism
Criticism
Consumerism
Corporate nationalism
Corporatism
Culture of capitalism
History
History of theory
Perspectives on capitalism
Periodizations of capitalism
Trickle-down economics

Movements
Liberalism
Libertarianism
Neoconservatism
Neoliberalism
Objectivism
Objectivist movement
Ordoliberalism
Social democracy

Capitalism Portal
Philosophy Portal
Economics Portal
Politics Portal
v · d · e

Capitalism is an economic system in which the means of production are privately owned and operated for a private profit; decisions regarding supply, demand, price, distribution, and investments are made by private actors in the free market; profit is distributed to owners who invest in businesses, and wages are paid to workers employed by businesses and companies.
There is no consensus on the precise definition of capitalism, nor how the term should be used as an analytical category.[1] There is, however, little controversy that private ownership of the means of production, creation of goods or services for profit in a market, and prices and wages are elements of capitalism.[2] There are a variety of historical cases to which the designation is applied, varying in time, geography, politics and culture.[3] Some define capitalism as where all the means of production are privately owned, and some define it more loosely where merely "most" are in private hands —while others refer to the latter as a mixed economy biased toward capitalism. More fundamentally, others define capitalism as a system where production is carried out to generate profit, or exchange-value, regardless of legal ownership titles. Private ownership in capitalism implies the right to control property, including determining how it is used, who uses it, whether to sell or rent it, and the right to the revenue generated by the property.[4]
Economists, political economists and historians have taken different perspectives on the analysis of capitalism. Economists usually emphasize the degree that government does not have control over markets (laissez faire), and on property rights.[5][6] Most political economists emphasize private property, power relations, wage labor and class.[7] There is general agreement that capitalism encourages economic growth.[8] The extent to which different markets are free, as well as the rules defining private property, is a matter of politics and policy, and many states have what are termed mixed economies.[7]
Capitalism, as a deliberate economic system, developed incrementally from the 16th century in Europe,[9] although proto-capitalist organizations existed in the ancient world, and early aspects of merchant capitalism flourished during the Late Middle Ages.[10][11][12] Capitalism became dominant in the Western world following the demise of feudalism.[12] Capitalism gradually spread throughout Europe, and in the 19th and 20th centuries, it provided the main means of industrialization throughout much of the world.[3] Today the capitalist system is the world's most dominant form of economic model.
Contents [hide]
1 Etymology and early usage
2 Economic elements
3 Types of capitalism
3.1 Anarcho-capitalism
3.2 Mercantilism
3.3 Free-market capitalism
3.4 Social market economy
3.5 State capitalism
3.6 Corporate capitalism
3.7 Mixed economy
3.8 Other
4 History
4.1 Mercantilism
4.2 Industrialism
4.3 Keynesianism and neoliberalism
4.4 Globalization
5 Neoclassical economic theory
5.1 The market
5.2 Role of government
6 Democracy, the state, and legal frameworks
6.1 Private property
6.2 Institutions
6.3 Democracy
7 Political benefits
7.1 Economic growth
7.2 Political freedom
7.3 Self-organization
7.4 Moral imperative
8 Criticism
9 See also
10 Notes
11 References
12 Further reading
13 External links

Etymology and early usageOther terms sometimes used for capitalism:
Capitalist mode of production
Economic liberalism[13]
Free-enterprise economy[12][14]
Free market[14][15]
Laissez-faire economy[16]
Market economy[17]
Market liberalism[18][19]
Self-regulating market[14]

Capital evolved from Capitale, a late Latin word based on proto-Indo-European caput, meaning "head"—also the origin of chattel and cattle in the sense of movable property (only much later to refer only to livestock). Capitale emerged in the 12th to 13th centuries in the sense of funds, stock of merchandise, sum of money, or money carrying interest.[10][20][21] By 1283 it was used in the sense of the capital assets of a trading firm. It was frequently interchanged with a number of other words—wealth, money, funds, goods, assets, property and so on.[10]
The term capitalist refers to an owner of capital rather than an economic system, but shows earlier recorded use than the term capitalism, dating back to the mid-seventeenth century. The Hollandische Mercurius uses it in 1633 and 1654 to refer to owners of capital.[10] In French, Étienne Clavier referred to capitalistes in 1788,[22] six years before its first recorded English usage by Arthur Young in his work Travels in France (1792).[21][23] David Ricardo, in his Principles of Political Economy and Taxation (1817), referred to "the capitalist" many times.[24]
Samuel Taylor Coleridge, an English poet, used capitalist in his work Table Talk (1823).[25] Pierre-Joseph Proudhon used the term capitalist in his first work, What is Property? (1840) to refer to the owners of capital. Benjamin Disraeli used the term capitalist in his 1845 work Sybil.[21] Karl Marx and Friedrich Engels used the term capitalist (Kapitalist) in The Communist Manifesto (1848) to refer to a private owner of capital.
According to the Oxford English Dictionary (OED), the term capitalism was first used by novelist William Makepeace Thackeray in 1854 in The Newcomes, where he meant "having ownership of capital".[21] Also according to the OED, Carl Adolph Douai, a German-American socialist and abolitionist, used the term private capitalism in 1863.
The initial usage of the term capitalism in its modern sense has been attributed to Louis Blanc in 1850 and Pierre-Joseph Proudhon in 1861.[26] Marx and Engels referred to the capitalistic system (kapitalistisches System)[27][28] and to the capitalist mode of production (kapitalistische Produktionsform) in Das Kapital (1867).[29] The use of the word "capitalism" in reference to an economic system appears twice in Volume I of Das Kapital, p. 124 (German edition), and in Theories of Surplus Value, tome II, p. 493 (German edition). Marx did not extensively use the form capitalism, but instead those of capitalist and capitalist mode of production, which appear more than 2600 times in the trilogy Das Kapital.
Marx's notion of the capitalist mode of production is characterised as a system of primarily private ownership of the means of production in a mainly market economy, with a legal framework on commerce and a physical infrastructure provided by the state.[30][page needed] Engels made more frequent use of the term capitalism; volumes II and III of Das Kapital, both edited by Engels after Marx's death, contain the word "capitalism" four and three times, respectively. The three combined volumes of Das Kapital (1867, 1885, 1894) contain the word capitalist more than 2,600 times.
An 1877 work entitled Better Times by Hugh Gabutt and an 1884 article in the Pall Mall Gazette also used the term capitalism.[21] A later use of the term capitalism to describe the production system was by the German economist Werner Sombart, in his 1902 book The Jews and Modern Capitalism (Die Juden und das Wirtschaftsleben). Sombart's close friend and colleague, Max Weber, also used capitalism in his 1904 book The Protestant Ethic and the Spirit of Capitalism (Die protestantische Ethik und der Geist des Kapitalismus).
Economic elements This section needs additional citations for verification.
Please help improve this article by adding reliable references. Unsourced material may be challenged and removed. (May 2010)
Capitalist economics developed out of the interactions of the following elements.
A product is any good produced for exchange on a market. "Commodities" refers to standard products, especially raw materials such as grains and metals, that are not associated with particular producers or brands and trade on organized exchanges.
There are two types of products: capital goods and consumer goods. Capital goods (i.e., raw materials, tools, industrial machines, vehicles and factories) are used to produce consumer goods (e.g., televisions, cars, computers, houses) to be sold to others. The three inputs required for production are labor, land (i.e., natural resources, which exist prior to human beings) and capital goods. Capitalism entails the private ownership of the latter two—natural resources and capital goods—by a class of owners called capitalists, either individually, collectively or through a state apparatus that operates for a profit or serves the interests of capital owners.
Money was primarily a standardized medium of exchange, and final means of payment, that serves to measure the value all goods and commodities in a standard of value. It eliminates the cumbersome system of barter by separating the transactions involved in the exchange of products, thus greatly facilitating specialization and trade through encouraging the exchange of commodities. Capitalism involves the further abstraction of money into other exchangeable assets and the accumulation of money through ownership, exchange, interest and various other financial instruments. However, besides serving as a medium of exchange for labour, goods and services, money is also a store of value, similar to precious metals.
Labour includes all physical and mental human resources, including entrepreneurial capacity and management skills, which are needed to produce products and services. Production is the act of making products or services by applying labour power to the means of production.[31][32]
Types of capitalismEconomics

Economies by region Africa · North America
South America · Asia
Europe · Oceania

General categories
Microeconomics · Macroeconomics
History of economic thought
Methodology · Heterodox approaches

Mathematical methods
Mathematical · Computational
Econometrics · Data · Experimental

Fields and subfields
Behavioral · Cultural · Evolutionary
Growth · Development · History
International · Economic systems
Monetary and Financial economics
Public and Welfare economics
Health · Education · Welfare
Population · Labour · Managerial
Business · Information · Game theory
Industrial organization · Law
Agricultural · Natural resource
Environmental · Ecological
Urban · Rural · Regional · Geography

Lists
Journals · Publications
Categories · Topics · Economists

Economic ideologies Anarchism · Capitalism
Communism · Corporatism
Fascism · Feudalism
Georgism · Imperialism
Islamic · Laissez-faire
Leninism · Maoism
Market socialism · Marxism
Monarchy · Monopolism
Mercantilism · Neocolonialism
Oligarchy · Oligopoly
Plutocracy · Primitivism
Protectionism · Socialism
Syndicalism · Third Way

Economy: concept and history
Business and Economics Portal
This box: view · talk · edit
There are many variants of capitalism in existence. All these forms of capitalism are based on production for profit, at least a moderate degree of market allocation and capital accumulation. The dominant forms of capitalism are listed here.
Anarcho-capitalism
Main article: Anarcho-capitalism
See also: Free-market anarchism
Anarcho-capitalism is a libertarian and individualist anarchist political philosophy that advocates the elimination of the state and the elevation of the sovereign individual in a free market. In an anarcho-capitalist society, law enforcement, courts, and all other security services would be provided by voluntarily-funded competitors such as dispute resolution organisations and private defense agencies rather than through taxation, and money would be privately and competitively provided in an open market.
Mercantilism
Main article: Mercantilism
See also: Protectionism
A nationalist-oriented form of early capitalism that uses the state to advance national business interests abroad, and holds that the wealth of a nation is increased through a positive balance of trade with other nations.
Free-market capitalism
Main article: Free market
See also: Laissez-faire
Free market capitalism consists of a free-price system where supply and demand are allowed to reach their point of equilibrium without intervention by the government. Productive enterprises are privately-owned, and the role of the state is limited to enforcing property rights.
Social market economy
Main article: Social market
A social market economy is a nominally free-market system where government intervention in price formation is kept to a minimum, but the state provides for moderate to extensive provision of social security, unemployment benefits and recognition of labor rights through national collective bargaining schemes. The social market is based on private ownership of businesses.
State capitalism
Main article: State capitalism
State capitalism consists of state-ownership of profit-seeking enterprises that operate in a capitalist manner in a market economy; examples of this include corporatized government agencies or partial ownership of shares in publicly-listed firms by the state. State capitalism is also used to refer to an economy consisting of mainly private enterprises that are subjected to comprehensive national economic planning by the government, where the state intervenes in the economy to protect specific capitalist businesses. Many anti-USSR socialists, as well as many anarchists, argue that the Soviet Union was never socialist, but rather state capitalist, since the state owned all the means of production and functioned as an enormous corporation, and exploited the working class as such.
Corporate capitalism
Main article: Corporate capitalism
See also: State monopoly capitalism
Corporate capitalism is a free or mixed market characterized by the dominance of hierarchical, bureaucratic corporations, which are legally required to pursue profit. State monopoly capitalism refers to a form of corporate capitalism where the state is used to benefit, protect from competition and promote the interests of dominant or established corporations.
Mixed economy
Main article: Mixed economy
A largely market-based economy consisting of both public ownership and private ownership of the means of production. In practice, a mixed economy will be heavily slanted toward one extreme; most capitalist economies are defined as "mixed economies" to some degree and are characterized by the dominance of private ownership.
Other
Other variants of capitalism include:
Crony capitalism
Finance capitalism
Financial capitalism
Late capitalism
Market economy
Neo-Capitalism
Post-capitalism
State monopoly capitalism
Technocapitalism

History
Main article: History of capitalism
Mercantilism
Main article: Mercantilism

A painting of a French seaport from 1638 at the height of mercantilism.The period between the sixteenth and eighteenth centuries is commonly described as mercantilism.[33] This period was associated with geographic exploration of the Age of Discovery being exploited by merchant overseas traders, especially from England and the Low Countries; the European colonization of the Americas; and the rapid growth in overseas trade. Mercantilism was a system of trade for profit, although commodities were still largely produced by non-capitalist production methods.[3]
While some scholars see mercantilism as the earliest stage of capitalism, others argue that capitalism did not emerge until later. For example, Karl Polanyi, noted that "mercantilism, with all its tendency toward commercialization, never attacked the safeguards which protected [the] two basic elements of production—labor and land—from becoming the elements of commerce"; thus mercantilist attitudes towards economic regulation were closer to feudalist attitudes, "they disagreed only on the methods of regulation."
Moreover Polanyi argued that the hallmark of capitalism is the establishment of generalized markets for what he referred to as the "fictitious commodities": land, labor, and money. Accordingly, "not until 1834 was a competitive labor market established in England, hence industrial capitalism as a social system cannot be said to have existed before that date."[34]
Evidence of long-distance merchant-driven trade motivated by profit has been found as early as the second millennium BC, with the Old Assyrian merchants.[35] The earliest forms of mercantilism date back to the Roman Empire. When the Roman Empire expanded, the mercantilist economy expanded throughout Europe. After the collapse of the Roman Empire, most of the European economy became controlled by local feudal powers, and mercantilism collapsed there. However, mercantilism persisted in Arabia. Due to its proximity to neighboring countries, the Arabs established trade routes to Egypt, Persia, and Byzantium. As Islam spread in the seventh century, mercantilism spread rapidly to Spain, Portugal, Northern Africa, and Asia. Mercantilism finally revived in Europe in the fourteenth century, as mercantilism spread from Spain and Portugal.[36]
Among the major tenets of mercantilist theory was bullionism, a doctrine stressing the importance of accumulating precious metals. Mercantilists argued that a state should export more goods than it imported so that foreigners would have to pay the difference in precious metals. Mercantilists asserted that only raw materials that could not be extracted at home should be imported; and promoted government subsidies, such as the granting of monopolies and protective tariffs, were necessary to encourage home production of manufactured goods.

Robert Clive after the Battle of Plassey. The battle began East India Company rule in India.European merchants, backed by state controls, subsidies, and monopolies, made most of their profits from the buying and selling of goods. In the words of Francis Bacon, the purpose of mercantilism was "the opening and well-balancing of trade; the cherishing of manufacturers; the banishing of idleness; the repressing of waste and excess by sumptuary laws; the improvement and husbanding of the soil; the regulation of prices…"[37]
Similar practices of economic regimentation had begun earlier in the medieval towns. However, under mercantilism, given the contemporaneous rise of absolutism, the state superseded the local guilds as the regulator of the economy. During that time the guilds essentially functioned like cartels that monopolized the quantity of craftsmen to earn above-market wages.[38]
At the period from the eighteenth century, the commercial stage of capitalism originated from the start of the British East India Company and the Dutch East India Company.[11][39] These companies were characterized by their colonial and expansionary powers given to them by nation-states.[11] During this era, merchants, who had traded under the previous stage of mercantilism, invested capital in the East India Companies and other colonies, seeking a return on investment. In his "History of Economic Analysis," Austrian economist Joseph Schumpeter reduced mercantilist propositions to three main concerns: exchange controls, export monopolism and balance of trade.[40]
Industrialism
See also: Industrial Revolution

A Watt steam engine. The steam engine fuelled primarily by coal propelled the Industrial Revolution in Great Britain.[41]A new group of economic theorists, led by David Hume[42] and Adam Smith, in the mid 18th century, challenged fundamental mercantilist doctrines as the belief that the amount of the world’s wealth remained constant and that a state could only increase its wealth at the expense of another state.
During the Industrial Revolution, the industrialist replaced the merchant as a dominant actor in the capitalist system and effected the decline of the traditional handicraft skills of artisans, guilds, and journeymen. Also during this period, the surplus generated by the rise of commercial agriculture encouraged increased mechanization of agriculture. Industrial capitalism marked the development of the factory system of manufacturing, characterized by a complex division of labor between and within work process and the routine of work tasks; and finally established the global domination of the capitalist mode of production.[33]
Britain also abandoned its protectionist policy, as embraced by mercantilism. In the 19th century, Richard Cobden and John Bright, who based their beliefs on the Manchester School, initiated a movement to lower tariffs.[43] In the 1840s, Britain adopted a less protectionist policy, with the repeal of the Corn Laws and the Navigation Acts.[33] Britain reduced tariffs and quotas, in line with Adam Smith and David Ricardo's advocacy for free trade.
Karl Polanyi argued that capitalism did not emerge until the progressive commodification of land, money, and labor culminating in the establishment of a generalized labor market in Britain in the 1830s. For Polanyi, "the extension of the market to the elements of industry - land, labor and money - was the inevitable consequence of the introduction of the factory system in a commercial society."[44] Other sources argued that mercantilism fell after the repeal of the Navigation Acts in 1849.[43][45][46]
Keynesianism and neoliberalism
Main articles: Keynesianism and Neoliberalism
In the period following the global depression of the 1930s, the state played an increasingly prominent role in the capitalistic system throughout much of the world.

The New York stock exchange traders' floor (1963)After World War II, a broad array of new analytical tools in the social sciences were developed to explain the social and economic trends of the period, including the concepts of post-industrial society and the welfare state.[33] This era was greatly influenced by Keynesian economic stabilization policies. The postwar boom ended in the late 1960s and early 1970s, and the situation was worsened by the rise of stagflation.[47]
Exceptionally high inflation combined with slow output growth, rising unemployment, and eventually recession to cause a loss of credibility in the Keynesian welfare-statist mode of regulation. Under the influence of Friedrich Hayek and Milton Friedman, Western states embraced policy prescriptions inspired by laissez-faire capitalism and classical liberalism.
In particular, monetarism, a theoretical alternative to Keynesianism that is more compatible with laissez-faire, gained increasing prominence in the capitalist world, especially under the leadership of Ronald Reagan in the US and Margaret Thatcher in the UK in the 1980s. Public and political interest began shifting away from the so-called collectivist concerns of Keynes's managed capitalism to a focus on individual choice, called "remarketized capitalism." [48] In the eyes of many economic and political commentators, the collapse of the Soviet Union brought further evidence of the superiority of market capitalism over communism.
Globalization
Main article: Globalization
Although international trade has been associated with the development of capitalism for over five hundred years, some thinkers argue that a number of trends associated with globalization have acted to increase the mobility of people and capital since the last quarter of the 20th century, combining to circumscribe the room to maneuver of states in choosing non-capitalist models of development. Today, these trends have bolstered the argument that capitalism should now be viewed as a truly world system.[33] However, other thinkers argue that globalization, even in its quantitative degree, is no greater now than during earlier periods of capitalist trade.[49]
Neoclassical economic theory This section needs additional citations for verification.
Please help improve this article by adding reliable references. Unsourced material may be challenged and removed. (June 2010)
Neoclassical economics explain capitalism as made up of individuals, enterprises, markets and government. According to their theories, individuals engage in a capitalist economy as consumers, labourers, and investors. As labourers, individuals may decide which jobs to prepare for, and in which markets to look for work. As investors they decide how much of their income to save and how to invest their savings. These savings, which become investments, provide much of the money that businesses need to grow.
Business firms decide what to produce and where this production should occur. They also purchase inputs (materials, labour, and capital). Businesses try to influence consumer purchase decisions through marketing and advertisement, as well as the creation of new and improved products. Driving the capitalist economy is the search for profits (revenues minus expenses). This is known as the profit motive, and it helps ensure that companies produce the goods and services that consumers desire and are able to buy. To be profitable, firms must sell a quantity of their product at a certain price to yield a profit. A business may lose money if sales fall too low or if its costs become too high. The profit motive encourages firms to operate more efficiently. By using less materials, labour or capital, a firm can cut its production costs, which can lead to increased profits.
An economy grows when the total value of goods and services produced rises. This growth requires investment in infrastructure, capital and other resources necessary in production. In a capitalist system, businesses decide when and how much they want to invest.
Income in a capitalist economy depends primarily on what skills are in demand and what skills are being supplied. Skills that are in scarce supply are worth more in the market and can attract higher incomes. Competition among workers for jobs — and among employers for skilled workers — help determine wage rates. Firms need to pay high enough wages to attract the appropriate workers; when jobs are scarce, workers may accept lower wages than they would when jobs are plentiful. Trade union and governments influence wages in capitalist systems. Unions act to represent their members in negotiations with employers over such things as wage rates and acceptable working conditions.
The market

The price (P) of a product is determined by a balance between production at each price (supply, S) and the desires of those with purchasing power at each price (demand, D). This results in a market equilibrium, with a given quantity (Q) sold of the product. A rise in demand from D1 to D2 would result in an increase in price from P1 to P2 and an increase in output from Q1 to Q2.In a capitalist economy, the prices of goods and services are controlled mainly through supply and demand and competition. Supply is the amount of a good or service produced by a firm and which is available for sale. Demand is the amount that people are willing to buy at a specific price. Prices tend to rise when demand exceeds supply, and fall when supply exceeds demand. In theory, the market is able to coordinate itself when a new equilibrium price and quantity is reached.
Competition arises when more than one producer is trying to sell the same or similar products to the same buyers. In capitalist theory, competition leads to innovation and more affordable prices. Without competition, a monopoly or cartel may develop. A monopoly occurs when a firm supplies the total output in the market; the firm can therefore limit output and raise prices because it has no fear of competition. A cartel is a group of firms that act together in a monopolistic manner to control output and raise prices.
Role of government
Further information: Competition regulator, Consumer protection, and Competition law
In a capitalist system, the government does not prohibit private property or prevent individuals from working where they please. The government does not prevent firms from determining what wages they will pay and what prices they will charge for their products. Many countries, however, have minimum wage laws and minimum safety standards.
Under some versions of capitalism, the government carries out a number of economic functions, such as issuing money, supervising public utilities and enforcing private contracts. Many countries have competition laws that prohibit monopolies and cartels from forming. Despite anti-monopoly laws, large corporations can form near-monopolies in some industries. Such firms can temporarily drop prices and accept losses to prevent competition from entering the market, and then raise them again once the threat of entry is reduced. In many countries, public utilities (e.g. electricity, heating fuel, communications) are able to operate as a monopoly under government regulation, due to high economies of scale.
Government agencies regulate the standards of service in many industries, such as airlines and broadcasting, as well as financing a wide range of programs. In addition, the government regulates the flow of capital and uses financial tools such as the interest rate to control factors such as inflation and unemployment.[50]
Democracy, the state, and legal frameworks
Main article: History of capitalist theory
Private property
The relationship between the state, its formal mechanisms, and capitalist societies has been debated in many fields of social and political theory, with active discussion since the 19th century. Hernando de Soto is a contemporary economist who has argued that an important characteristic of capitalism is the functioning state protection of property rights in a formal property system where ownership and transactions are clearly recorded.[51]
According to de Soto, this is the process by which physical assets are transformed into capital, which in turn may be used in many more ways and much more efficiently in the market economy. A number of Marxian economists have argued that the Enclosure Acts in England, and similar legislation elsewhere, were an integral part of capitalist primitive accumulation and that specific legal frameworks of private land ownership have been integral to the development of capitalism.[52][53]
Institutions
New institutional economics, a field pioneered by Douglass North, stresses the need of a legal framework in order for capitalism to function optimally, and focuses on the relationship between the historical development of capitalism and the creation and maintenance of political and economic institutions.[54] In new institutional economics and other fields focusing on public policy, economists seek to judge when and whether governmental intervention (such as taxes, welfare, and government regulation) can result in potential gains in efficiency. According to Gregory Mankiw, a New Keynesian economist, governmental intervention can improve on market outcomes under conditions of "market failure", or situations in which the market on its own does not allocate resources efficiently.[55]
Market failure occurs when an externality is present and a market will either under-produce a product with a positive externalization or overproduce a product that generates a negative externalization. Air pollution, for instance, is a negative externalization that cannot be incorporated into markets as the world’s air is not owned and then sold for use to polluters. So, too much pollution could be emitted and people not involved in the production pay the cost of the pollution instead of the firm that initially emitted the air pollution. Critics of market failure theory, like Ronald Coase, Harold Demsetz, and James M. Buchanan argue that government programs and policies also fall short of absolute perfection. Market failures are often small, and government failures are sometimes large. It is therefore the case that imperfect markets are often better than imperfect governmental alternatives. While all nations currently have some kind of market regulations, the desirable degree of regulation is disputed.
Democracy
The relationship between democracy and capitalism is a contentious area in theory and popular political movements. The extension of universal adult male suffrage in 19th century Britain occurred along with the development of industrial capitalism, and democracy became widespread at the same time as capitalism, leading many theorists to posit a causal relationship between them, or that each affects the other. However, in the 20th century, according to some authors, capitalism also accompanied a variety of political formations quite distinct from liberal democracies, including fascist regimes, monarchies, and single-party states,[33] while some democratic societies such as the Bolivarian Republic of Venezuela and Anarchist Catalonia have been expressly anti-capitalist.[56]
While some thinkers argue that capitalist development more-or-less inevitably eventually leads to the emergence of democracy, others dispute this claim. Research on the democratic peace theory indicates that capitalist democracies rarely make war with one another[57] and have little internal violence. However critics of the democratic peace theory note that democratic capitalist states may fight infrequently and or never with other democratic capitalist states because of political similarity or stability rather than because they are democratic or capitalist.
Some commentators argue that though economic growth under capitalism has led to democratization in the past, it may not do so in the future, as authoritarian regimes have been able to manage economic growth without making concessions to greater political freedom.[58][59] States that have highly capitalistic economic systems have thrived under authoritarian or oppressive political systems. Singapore, which maintains a highly open market economy and attracts lots of foreign investment, does not protect civil liberties such as freedom of speech and expression. The private (capitalist) sector in the People's Republic of China has grown exponentially and thrived since its inception, despite having an authoritarian government. Private investment in Fascist states, such as Nazi Germany, greatly increased[citation needed]. Augusto Pinochet's rule in Chile led to economic growth by using authoritarian means to create a safe environment for investment and capitalism.
In response to criticism of the system, some proponents of capitalism have argued that its advantages are supported by empirical research. For example, advocates of different Indices of Economic Freedom point to a statistical correlation between nations with more economic freedom (as defined by the indices) and higher scores on variables such as income and life expectancy, including the poor, in these nations.
Political benefits
Economic growth

World's GDP per capita shows exponential growth since the beginning of the Industrial Revolution.[60]
Capitalism and the economy of the People's Republic of ChinaIn years 1000 - 1820 world economy grew sixfold, 50 % per person. After capitalism had started to spread more widely, in years 1820 - 1998 world economy grew 50-fold, i.e., 9-fold per person.[61] In most capitalist economic regions such as Europe, the United States, Canada, Australia and New Zealand, the economy grew 19-fold per person even though these countries already had a higher starting level, and in Japan, which was poor in 1820, to 31-fold, whereas in the rest of the world the growth was only 5-fold per person.[61]
Many theorists and policymakers in predominantly capitalist nations have emphasized capitalism's ability to promote economic growth, as measured by Gross Domestic Product (GDP), capacity utilization or standard of living. This argument was central, for example, to Adam Smith's advocacy of letting a free market control production and price, and allocate resources. Many theorists have noted that this increase in global GDP over time coincides with the emergence of the modern world capitalist system.[62][63]
Proponents argue that increasing GDP (per capita) is empirically shown to bring about improved standards of living, such as better availability of food, housing, clothing, and health care.[64] The decrease in the number of hours worked per week and the decreased participation of children and the elderly in the workforce have been attributed to capitalism.[65][66][67][68]
Proponents also believe that a capitalist economy offers far more opportunities for individuals to raise their income through new professions or business ventures than do other economic forms. To their thinking, this potential is much greater than in either traditional feudal or tribal societies or in socialist societies.
Political freedom
Milton Friedman argued that the economic freedom of competitive capitalism is a requisite of political freedom. Friedman argued that centralized control of economic activity is always accompanied by political repression. In his view, transactions in a market economy are voluntary, and the wide diversity that voluntary activity permits is a fundamental threat to repressive political leaders and greatly diminish power to coerce. Friedman's view was also shared by Friedrich Hayek and John Maynard Keynes, both of whom believed that capitalism is vital for freedom to survive and thrive.[69][70]
Self-organization
Austrian School economists have argued that capitalism can organize itself into a complex system without an external guidance or planning mechanism. Friedrich Hayek coined the term "catallaxy" to describe what he considered the phenomenon of self-organization underpinning capitalism. From this perspective, in process of self-organization, the profit motive has an important role. From transactions between buyers and sellers price systems emerge, and prices serve as a signal as to the urgent and unfilled wants of people. The promise of profits gives entrepreneurs incentive to use their knowledge and resources to satisfy those wants. Thus the activities of millions of people, each seeking his own interest, are coordinated.[71]
This decentralized system of coordination is viewed by some supporters of capitalism as one of its greatest strengths. They argue that it permits many solutions to be tried, and that real-world competition generally finds a good solution to emerging challenges. In contrast, they argue, central planning often selects inappropriate solutions as a result of faulty forecasting. However, in all existing modern economies, the state conducts some degree of centralized economic planning (using such tools as allowing the country's central bank to set base interest rates), ostensibly as an attempt to improve efficiency, attenuate cyclical volatility, and further particular social goals. Proponents who follow the Austrian School argue that even this limited control creates inefficiencies because we cannot predict the long-term activity of the economy. Milton Friedman, for example, has argued that the Great Depression was caused by the erroneous policy of the Federal Reserve.[72]
Moral imperative
Ayn Rand was a notable advocate of laissez-faire capitalism, and her best-selling novel Atlas Shrugged has been an influential publication on business.[73] Rand was the first person to endow capitalism with a new code of morality--rational egoism.[74] She argued that capitalism is the only morally valid socio-political system because it allows people to be free to act in their rational self-interest.[75][76] Rand wrote: "Capitalism is a social system based on the recognition of individual rights, including property rights, in which all property is privately owned."[77]
Criticism
Main articles: Criticism of capitalism, Anti-capitalism, and Capitalist mode of production

An Industrial Workers of the World poster (1911)Critics of capitalism associate it with: unfair distribution of wealth and power; a tendency toward market monopoly or oligopoly (and government by oligarchy); imperialism, counter-revolutionary wars and various forms of economic and cultural exploitation; repression of workers and trade unionists; social alienation; economic inequality; unemployment; and economic instability.
Notable critics of capitalism have included: socialists, anarchists, communists, social democrats, technocrats, some types of conservatives, Luddites, Narodniks, Shakers and some types of nationalists.
Marxists have advocated a revolutionary overthrow of capitalism that would lead to socialism, before eventually transforming into communism. Many socialists consider capitalism to be irrational, in that production and the direction of the economy are unplanned, creating many inconsistencies and internal contradictions.[78] Labor historians and scholars such as Immanuel Wallerstein have argued that unfree labor — by slaves, indentured servants, prisoners, and other coerced persons — is compatible with capitalist relations.[79]
Many aspects of capitalism have come under attack from the anti-globalization movement, which is primarily opposed to corporate capitalism. Environmentalists have argued that capitalism requires continual economic growth, and that it will inevitably deplete the finite natural resources of the Earth. McMurty, John (1999). The Cancer Stage of Capitalism. PLUTO PRESS . ISBN 0745313477.
Many religions have criticized or opposed specific elements of capitalism. Traditional Judaism, Christianity, and Islam forbid lending money at interest, although alternative methods of banking have been developed. Some Christians have criticized capitalism for its materialist aspects.[80] Indian philosopher P.R. Sarkar, founder of the Ananda Marga movement, developed the Law of Social Cycle to identify the problems of capitalism.[81][82]
See also
People
Adam Smith
Amartya Sen
Andrew Carnegie
Ayn Rand
Eugen von Böhm-Bawerk
Frederic Bastiat
Freidrich Engels
Friedrich Hayek
John D. Rockefeller
John Maynard Keynes
John Locke
John Stuart Mill
Joseph Stiglitz
J. P. Morgan
Karl Marx
Ludwig Von Mises
Milton Friedman
Murray Rothbard
Thorstein Veblen
Concepts
Business
Capital (economics)
Chicago school
Classical Economics
Consumption (economics)
Economics
Calculation Problem
Economic equilibrium
Economic liberalism
Entrepreneurship
Factors of production
Financial market
Free price system
Gains from trade
History of Economic Thought
Industrial Revolution
Invisible hand
Institutional economics
Keynesianism
Laissez-faire
Macroeconomics
Marginalism
Market
Market Economy
Mass production
Means of production
Microeconomics
Monetarism
Neoclassical economics
Perspectives on Capitalism
Private property
Privatization
Positive non-interventionism
Profit (economics)
Spontaneous order
Supply and demand
Supply-side economics
Trickle down economics
Capitalism portal
Economics portal
Works
Capitalism and Freedom
Das Kapital
Free to Choose
Grundrisse
Individualism and Economic Order
Man, Economy, and State
The Anti-Capitalistic Mentality
The Communist Manifesto
The Law
The Road to Serfdom
The Theory of Business Enterprise
The Wealth of Nations

Notes
1.^ The Idea of Capitalism before the Industrial Revolution. Critical Issues in History. Lanham, Md: Rowman and Littlefield, 1999, p. 1
2.^ Tormey, Simon. Anti-Capitalism. One World Publications, 2004. p. 10
3.^ a b c Scott, John (2005). Industrialism: A Dictionary of Sociology. Oxford University Press.
4.^ Bessette, Joseph M. American Justice, Volume 2. Salem Press (1996). p. 637
5.^ Tucker, Irvin B. (1997). Macroeconomics for Today. pp. 553.
6.^ Case, Karl E. (2004). Principles of Macroeconomics. Prentice Hall.
7.^ a b Stilwell, Frank. “Political Economy: the Contest of Economic Ideas.” First Edition. Oxford University Press. Melbourne, Australia. 2002.
8.^ "Economic systems". Encyclopedia Britannica 2007 Ultimate Reference Suite. (Chicago: Encyclopædia Britannica, 2009)
9.^ "Capitalism". Encyclopædia Britannica.
10.^ a b c d Braudel, Fernand (1982). "Production, or Capitalism away from home". The Wheels of Commerce, Vol. 2, Civilization & Capitalism 15th-18th Century. Los Angeles: University of California Press. pp. 231–373. ISBN 9780520081154. http://books.google.com/?id=WPDbSXQsvGIC&lpg=PP1&dq=capitalism%20and%20civilization%20wheels%20of%20commerce&pg=PP1#v=onepage&q=.
11.^ a b c Banaji, Jairus (2007). "Islam, the Mediterranean and the rise of capitalism". Journal Historical Materialism (Brill Publishers) 15: 47–74. doi:10.1163/156920607X171591.
12.^ a b c Capitalism. Encyclopedia Britannica. 2006.
13.^ Werhane, P.H. (1994). "Adam Smith and His Legacy for Modern Capitalism". The Review of Metaphysics (Philosophy Education Society, Inc.) 47 (3).
14.^ a b c "free enterprise." Roget's 21st Century Thesaurus, Third Edition. Philip Lief Group 2008.
15.^ Mutualist.org. "...based on voluntary cooperation, free exchange, or mutual aid."
16.^ Barrons Dictionary of Finance and Investment Terms. 1995. p. 74
17.^ "Market economy", Merriam-Webster Unabridged Dictionary
18.^ "About Cato". Cato.org. http://www.cato.org/about.php. Retrieved 6 November 2008.
19.^ "The Achievements of Nineteenth-Century Classical Liberalism". http://www.cato.org/university/module10.html.
Although the term "liberalism" retains its original meaning in most of the world, it has unfortunately come to have a very different meaning in late twentieth-century America. Hence terms such as "market liberalism," "classical liberalism," or "libertarianism" are often used in its place in America.
20.^ Etymology of "Cattle"
21.^ a b c d e James Augustus Henry Murray. "Capital". A New English Dictionary on Historical Principles. Oxford English Press. Vol 2. page 93.
22.^ e.g. "L'Angleterre a-t-elle l'heureux privilège de n'avoir ni Agioteurs, ni Banquiers, ni Faiseurs de services, ni Capitalistes?" in [Etienne Clavier] (1788) De la foi publique envers les créanciers de l'état: lettres à M. Linguet sur le n ° CXVI de ses annales p.19
23.^ Arthur Young. Travels in France
24.^ Ricardo, David. Principles of Political Economy and Taxation. 1821. John Murray Publisher, 3rd edition.
25.^ Samuel Taylor Coleridge. Tabel The Complete Works of Samuel Taylor Coleridge. page 267.
26.^ Braudel, Fernand. The Wheels of Commerce: Civilization and Capitalism 15-18 Century, Harper and Row, 1979, p.237
27.^ Karl Marx. Chapter 16: Absolute and Relative Surplus-Value. Das Kapital.
Die Verlängrung des Arbeitstags über den Punkt hinaus, wo der Arbeiter nur ein Äquivalent für den Wert seiner Arbeitskraft produziert hätte, und die Aneignung dieser Mehrarbeit durch das Kapital - das ist die Produktion des absoluten Mehrwerts. Sie bildet die allgemeine Grundlage des kapitalistischen Systems und den Ausgangspunkt der Produktion des relativen Mehrwerts.
The prolongation of the working-day beyond the point at which the labourer would have produced just an equivalent for the value of his labour-power, and the appropriation of that surplus-labour by capital, this is production of absolute surplus-value. It forms the general groundwork of the capitalist system, and the starting-point for the production of relative surplus-value.
28.^ Karl Marx. Chapter Twenty-Five: The General Law of Capitalist Accumulation. Das Kapital.
Die Erhöhung des Arbeitspreises bleibt also eingebannt in Grenzen, die die Grundlagen des kapitalistischen Systems nicht nur unangetastet lassen, sondern auch seine Reproduktion auf wachsender Stufenleiter sichern.
Die allgemeinen Grundlagen des kapitalistischen Systems einmal gegeben, tritt im Verlauf der Akkumulation jedesmal ein Punkt ein, wo die Entwicklung der Produktivität der gesellschaftlichen Arbeit der mächtigste Hebel der Akkumulation wird.
Wir sahen im vierten Abschnitt bei Analyse der Produktion des relativen Mehrwerts: innerhalb des kapitalistischen Systems vollziehn sich alle Methoden zur Steigerung der gesellschaftlichen Produktivkraft der Arbeit auf Kosten des individuellen Arbeiters;
29.^ Saunders, Peter (1995). Capitalism. University of Minnesota Press. p. 1
30.^ Karl Marx. Das Kapital.
31.^ Ragan, Christopher T.S., and Richard G. Lipsey. Microeconomics. Twelfth Canadian Edition ed. Toronto: Pearson Education Canada, 2008. Print.
32.^ Robbins, Richard H. Global problems and the culture of capitalism. Boston: Allyn & Bacon, 2007. Print.
33.^ a b c d e f Burnham, Peter (2003). Capitalism: The Concise Oxford Dictionary of Politics. Oxford University Press.
34.^ Polanyi, Karl. The Great Transformation. Beacon Press, Boston.1944.p87
35.^ Warburton, David, Macroeconomics from the beginning: The General Theory, Ancient Markets, and the Rate of Interest. Paris: Recherches et Publications, 2003.p49
36.^ The Rise of Capitalism
37.^ Quoted in Sir George Clark, The Seventeenth Century (New York: Oxford University Pres, 1961), p. 24.
38.^ Mancur Olson, The rise and decline of nations: economic growth, stagflation, and social rigidities (New Haven & London 1982).
39.^ Economic system :: Market systems. Encyclopedia Britannica. 2006. http://www.britannica.com/EBchecked/topic/178493/economic-system/61117/Market-systems#toc242146.
40.^ Schumpeter, J.A. (1954) History of Economic Analysis
41.^ Watt steam engine image: located in the lobby of into the Superior Technical School of Industrial Engineers of a the UPM (Madrid)
42.^ Hume, David (1752). Political Discourses. Edinburgh: A. Kincaid & A. Donaldson.
43.^ a b "laissez-faire". http://www.bartleby.com/65/la/laissezf.html.
44.^ Polanyi, Karl. The Great Transformation, Beacon Press. Boston. 1944. p.78
45.^ "Navigation Acts". http://www.bartleby.com/65/na/NavigatA.html.
46.^ LaHaye, Laura (1993). "Mercantilism". Concise Encyclepedia of Economics. Fortune Encyclopedia of Economics. http://www.econlib.org/library/Enc/Mercantilism.html.
47.^ Barnes, Trevor J. (2004). Reading economic geography. Blackwell Publishing. pp. 127. ISBN 063123554X.
48.^ Fulcher, James. Capitalism. 1st ed. New York: Oxford University Press, 2004.
49.^ Henwood, Doug (1 October 2003). After the New Economy. New Press. ISBN 1-56584-770-9.
50.^ "Capitalism." World Book Encyclopedia. 1988. 194. Print.
51.^ Hernando de Soto. "The mystery of capital". http://www.imf.org/external/pubs/ft/fandd/2001/03/desoto.htm. Retrieved 26 February 2008.
52.^ Karl Marx. "Capital, v. 1. Part VIII: primitive accumulation". http://www.marxists.org/archive/marx/works/1867-c1/ch27.htm. Retrieved 26 February 2008.
53.^ N. F. R. Crafts (April 1978). "Enclosure and labor supply revisited". Explorations in economic history 15 (15): 172–183. doi:10.1016/0014-4983(78)90019-0. .we the say yes
54.^ North, Douglass C. (1990). Institutions, Institutional Change and Economic Performance. Cambridge University Press.
55.^ Principles of Economics. Harvard University. 1997. pp. 10.
56.^ On the democratic nature of the Venezuelan state, see Gobiernoenlinea.ve. On the current government's rejection of capitalism in favor of socialism, see Gobiernoenlinea.ve and Minci.gob.ve
57.^ For the influence of capitalism on peace, see Mousseau, M. (2009) "The Social Market Roots of Democratic Peace", International Security 33 (4)
58.^ Mesquita, Bruce Bueno de (2005-09). "Development and Democracy". Foreign Affairs. http://www.foreignaffairs.org/20050901faessay84507/bruce-bueno-de-mesquita-george-w-downs/development-and-democracy.html. Retrieved 26 February 2008.
59.^ Single, Joseph T. (2004-09). "Why Democracies Excel". New York Times. http://www10.nytimes.com/cfr/international/20040901facomment_v83n4_siegle-weinstein-halperin.html?_r=5&oref=slogin&oref=slogin&oref=slogin&oref=slogin. Retrieved 26 February 2008.
60.^ Angus Maddison (2001). The World Economy: A Millennial Perspective. Paris: OECD. ISBN 92-64-18998-X.
61.^ a b Martin Wolf, Why Globalization works, s. 43-45
62.^ Robert E. Lucas Jr.. "The Industrial Revolution: Past and Future". Federal Reserve Bank of Minneapolis 2003 Annual Report. http://www.minneapolisfed.org/pubs/region/04-05/essay.cfm. Retrieved 26 February 2008.
63.^ J. Bradford DeLong. "Estimating World GDP, One Million B.C. – Present". http://www.j-bradford-delong.net/TCEH/1998_Draft/World_GDP/Estimating_World_GDP.html. Retrieved 26 February 2008.
64.^ Clark Nardinelli. "Industrial Revolution and the Standard of Living". http://www.econlib.org/library/Enc/IndustrialRevolutionandtheStandardofLiving.html. Retrieved 26 February 2008.
65.^ Barro, Robert J. (1997). Macroeconomics. MIT Press. ISBN 0262024365.
66.^ "Labor and Minimum Wages". Capitalism.org. http://www.capitalism.org/faq/labor.htm. Retrieved 26 February 2008.
67.^ Woods, Thomas E. (5 April 2004). "Morality and Economic Law: Toward a Reconciliation". Ludwig von Mises Institute. http://www.mises.org/article.aspx?Id=1481. Retrieved 26 February 2008.
68.^ Norberg, Johan. "Three Cheers for Global Capitalism". The American Enterprise. http://www.taemag.com/issues/articleid.18013/article_detail.asp. Retrieved 26 February 2008.
69.^ Friedrich Hayek (1944). The Road to Serfdom. University Of Chicago Press. ISBN 0-226-32061-8.
70.^ Bellamy, Richard (2003). The Cambridge History of Twentieth-Century Political Thought. Cambridge University Press. pp. 60. ISBN 0-521-56354-2.
71.^ Walberg, Herbert (2001). Education and Capitalism. Hoover Institution Press. pp. 87–89. ISBN 0-8179-3972-5.
72.^ Ben Bernanke (8 November 2002). "Remarks by Governor Ben S. Bernanke". The Federal Reserve Board. http://www.federalreserve.gov/BOARDDOCS/SPEECHES/2002/20021108/default.htm. Retrieved 26 February 2008.
73.^ Ayn Rand's Literature of Capitalism, The New York Times
74.^ Rand, Ayn, The Virtue of Selfishness: A New Concept of Egoism (1964)
75.^ Capitalism: The Unknown Ideal
76.^ Capitalism - Theory The Ayn Rand Lexicon.
77.^ Capitalism - The Unknown Ideal The Ayn Rand Lexicon.
78.^ Brander, James A. Government policy toward business. 4th ed. Mississauga, Ontario: John Wiley & Sons Canada, Ltd., 2006. Print.
79.^ That unfree labor is acceptable to capital was argued during the 1980s by Tom Brass. See Towards a Comparative Political Economy of Unfree Labor (Cass, 1999). Marcel van der Linden. ""Labour History as the History of Multitudes", Labour/Le Travail, 52, Fall 2003, p. 235-244". http://www.historycooperative.org/journals/llt/52/linden.html. Retrieved 26 February 2008.
80.^ "III. The Social Doctrine of the Church". The Vatican. http://www.vatican.va/archive/ENG0015/__P8C.HTM#-2FX. Retrieved 26 February 2008.
81.^ Dada Maheshvarananda. "After Capitalism". http://www.prout.org/aftercapitalism/. Retrieved 26 February 2008.
82.^ "proutworld". ProutWorld. http://www.proutworld.org/. Retrieved 26 February 2008.
References
Bacher, Christian (2007) Capitalism, Ethics and the Paradoxon of Self-exploitation Grin Verlag. p. 2
De George, Richard T. (1986) Business ethics p. 104
Lash, Scott and Urry, John (2000). Capitalism. In Nicholas Abercrombie, S. Hill & BS Turner (Eds.), The Penguin dictionary of sociology (4th ed.) (pp. 36–40).
Obrinsky, Mark (1983). Profit Theory and Capitalism. University of Pennsylvania Press. pp. 1. http://www.questia.com/PM.qst?a=o&d=4995059.
Wolf, Eric (1982) Europe and the People Without History
Wood, Ellen Meiksins (2002) The Origins of Capitalism: A Longer View London: Verso
Further reading
Abu-Lughod, Janet L. Before European Hegemony The World System A.D. 1250-1350. New York: Oxford UP, USA, 1991.
Ackerman, Frank; Lisa Heinzerling (24 August 2005). Priceless: On Knowing the Price of Everything and the Value of Nothing. New Press. pp. 277. ISBN 1565849817.
Buchanan, James M.. Politics Without Romance.
Braudel, Fernand. Civilization and Capitalism: 15th - 18 Century.
Bottomore, Tom (1985). Theories of Modern Capitalism.
H. Doucouliagos and M. Ulubasoglu (2006). "Democracy and Economic Growth: A meta-analysis". School of Accounting, Economics and Finance Deakin University Australia.
Coase, Ronald (1974). The Lighthouse in Economics.
Demsetz, Harold (1969). Information and Efficiency.
Fulcher, James (2004). Capitalism.
Friedman, Milton (1952). Capitalism and Freedom.
Galbraith, J.K. (1952). American Capitalism.
Böhm-Bawerk, Eugen von (1890). Capital and Interest: A Critical History of Economical Theory. London: Macmillan and Co..
Harvey, David (1990). The Political-Economic Transformation of Late Twentieth Century Capitalism.. Cambridge, MA: Blackwell Publishers. ISBN 0-631-16294-1.
Hayek, Friedrich A. (1975). The Pure Theory of Capital. Chicago: University of Chicago Press. ISBN 0-226-32081-2.
Hayek, Friedrich A. (1963). Capitalism and the Historians. Chicago: University of Chicago Press.
Heilbroner, Robert L. (1966). The Limits of American Capitalism.
Heilbroner, Robert L. (1985). The Nature and Logic of Capitalism.
Heilbroner, Robert L. (1987). Economics Explained.
Cryan, Dan (2009). Capitalism: A Graphic Guide.
Josephson, Matthew, The Money Lords; the great finance capitalists, 1925-1950, New York, Weybright and Talley, 1972.
Luxemburg, Rosa (1913). The Accumulation of Capital.
Marx, Karl (1886). Capital: A Critical Analysis of Capitalist Production.
Mises, Ludwig von (1998). Human Action: A Treatise on Economics. Scholars Edition.
Rand, Ayn (1986). Capitalism: The Unknown Ideal. Signet.
Reisman, George (1996). Capitalism: A Treatise on Economics. Ottawa, Illinois: Jameson Books. ISBN 0-915463-73-3.
Resnick, Stephen (1987). Knowledge & Class: a Marxian critique of political economy. Chicago: University of Chicago Press.
Rostow, W. W. (1960). The Stages of Economic Growth: A Non-Communist Manifesto. Cambridge: Cambridge University Press.
Schumpeter, J. A. (1983). Capitalism, Socialism, and Democracy.
Scott, Bruce (2009). The Concept of Capitalism. Springer. pp. 76. ISBN 3642031099.
China GDP - Dr. Fengbo Zhang introduced the Western economics, GDP and SNA system to China, replaced Soviet Union's MPS system.
Scott, John (1997). Corporate Business and Capitalist Classes.
Seldon, Arthur (2007). Capitalism: A Condensed Version. London: Institute of Economic Affairs.
Sennett, Richard (2006). The Culture of the New Capitalism.
Smith, Adam (1776). An Inquiry into the Nature and Causes of the Wealth of Nations.
De Soto, Hernando (2000). The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else. New York: Basic Books. ISBN 0-465-01614-6.
Strange, Susan (1986). Casino Capitalism.
Wallerstein, Immanuel. The Modern World System.
Weber, Max (1926). The Protestant Ethic and the Spirit of Capitalism.
External links Wikimedia Commons has media related to: Capitalism
Wikisource has the text of the 1922 Encyclopædia Britannica article Capitalism.
Wikiquote has a collection of quotations related to: Capitalism
Look up capitalism in Wiktionary, the free dictionary.
Capitalism on In Our Time at the BBC. (listen now)
Center on Capitalism and Society directed by Edmund Phelps
Interventionism: An Economic Analysis
The Impossibility of Socialism

This entry is from Wikipedia, the leading user-contributed encyclopedia. It may not have been reviewed by professional editors (see full disclaimer)
Donate to Wikimedia

Read more: http://www.answers.com/topic/capitalism#ixzz1CRzsqcgF

مشكور تعبتك

تعبك راحة خيتي ولا شكر على واجب

جميل جدا ان نتعاون


شكرا واد

وبصحتك يا انسة



المجنون


.

صحيح وجب علينا التعاون ولا شكر على واجب والاخت تستاهل